Publish Date

Jul 28, 2023


  • The Upper Tribunal issued a decision on 24 July 2023 that may have a significant positive impact for many businesses involved in share sales, where the ultimate aim of the sale is to fund wider business activity which will be subject to VAT.
  • In The Commissioners for His Majesty’s Revenue and Customs v Hotel La Tour Ltd [2023] UKUT 00178 (TCC), the Tribunal upheld an earlier decision in 2021, where it confirmed that the sale of shares by a holding company in a subsidiary that operated a hotel, with the ultimate economic aim of operating another hotel within the wider corporate group, did not restrict the business’s ability to recover VAT on costs.
  • As hotel accommodation is typically subject to VAT, the Tribunal agreed with the taxpayer that costs incurred in relation to the sale were correctly regarded as overheads of the business, and VAT charged on such costs was therefore recoverable as input tax.
  • This is a significant departure from long-standing HMRC policy in this area, which states that VAT charged on costs directly and immediately linked to a VAT exempt share sale are irrecoverable.


  • This decision is welcome news for businesses involved in share transactions where the primary aim is to raise funds in order to make taxable supplies for VAT purposes.  If the decision is ultimately implemented by HM Revenue and Customs (HMRC) then, the VAT recovery position will be greatly enhanced.
  • The Tribunal demonstrated that it was prepared to ‘look through’ the VAT exempt transaction (i.e. the sale of shares) and consider the wider business aim.  This presents an opportunity for businesses if they can clearly evidence this wider economic aim.
  • It is not yet known whether HMRC will appeal this decision, or whether this will result in a change in HMRC policy.  Nevertheless, this case does provide businesses with the opportunity to consider VAT restrictions on costs relating to transactions and corporate restructuring exercises involving the sale of shares.
  • This opportunity exists both retrospectively (the statutory limitation period is four years) with respect to work undertaken in the past; and also future transactions.  This will be critical for many businesses in the current financial climate where there is increasing pressure on cash-flow with many businesses considering restructuring to support their ongoing activities.


  • Our Indirect Tax Team can support businesses evaluate the scope of this opportunity and whether it applies to their circumstances.
  • Please contact Mairead Warren de BurcaMark McKay, or your regular A&M contact, to discuss further.