Hotel La Tour loses at the Supreme Court

Sandy Cochrane
Written by  Sandy Cochrane - Partner, VAT
Published on:  17 December 2025

The UK Supreme Court has ruled against Hotel La Tour Limited, confirming that VAT on professional fees incurred when selling shares cannot be reclaimed — even when the proceeds fund taxable business activities. The decision upholds the Court of Appeal’s earlier judgment and leaves HMRC’s restrictive policy in place. 

The case was heard before the Supreme Court on 24th–26th June 2025, making this much-anticipated judgment one of the most closely watched VAT cases in recent years. 

 

What the case was about

Hotel La Tour sold its Birmingham hotel by disposing of the shares in the company that owned it. The transaction raised capital for a new hotel development in Milton Keynes. They incurred around £76,000 in legal and advisory fees, including VAT, and sought to recover that VAT on the basis that the funds were used for a taxable project. 

The Supreme Court has now ruled that VAT on such fees remains tied to the exempt share sale itself, meaning it cannot be reclaimed, regardless of how the funds are used afterwards.

 

Why this matters

While this decision closes the door on broad VAT recovery for share disposals, it also highlights the complexity, and in some cases, the narrowness, of HMRC’s approach. Businesses should review whether any share-related transactions have led to VAT being incorrectly claimed, as HMRC may take an interest in ensuring adjustments are made.

 

How Gravita can help

Our VAT team can: 

  • Review past transactions to ensure VAT treatment aligns with this final judgment 
  • Assist in correcting any input VAT already claimed to minimise the risk of penalties or interest 
  • Provide guidance on structuring future transactions to avoid unexpected VAT exposures 

Although the Supreme Court has ruled in HMRC’s favour, this area remains one where careful review and expert advice can protect businesses from unnecessary costs or risks. 

Similar Insights

A VAT cut may help hospitality, but it is not a silver bullet

5th October 2026
Written by: Sudhir Rawal
The call from more than 800 hospitality businesses for a reduction in VAT from 20% to 10% reflects the growing financial pressures facing one of the UK’s largest employers and most socially important sectors. With...
link to Find Out More

Autumn Budget 2026: What could it mean for VAT and business growth?

30th September 2026
Written by: David Gage
With the 2026 Autumn Budget just around the corner, Britain cannot achieve growth while its tax system rewards people and businesses for doing less. On a medieval estate, the arrangement was clear. The farmer produced...
link to Find Out More
VAT

Client account interest and VAT: could separate legal entities help law firms?

29th September 2026
Written by: David Gage
In an earlier article, I examined how interest earned on client money can affect a law firm’s VAT recovery. For firms holding substantial client funds, the resulting restriction can be significant. We have since explored...
link to Find Out More

Sign up to Gravita's latest updates and newsletters

Stay up-to-date with our event invites, latest news and updates, straight from Gravita's experts.