Supreme Court decision in the Hotel La Tour case expected soon

Background

Hotel La Tour sold its Birmingham hotel by selling the shares in the company that owned it. The proceeds were used to fund the construction of a new hotel in Milton Keynes. The business incurred around £76,000 in professional fees, including VAT, and sought to recover that VAT on the basis that the funds were used for a taxable purpose.

Ordinarily, VAT on the sale of shares cannot be reclaimed because share sales are “exempt” for VAT purposes. However, Hotel La Tour argued that since the proceeds were used for a taxable business activity, the related VAT should be recoverable. The Supreme Court heard the case in June 2025 and the decision is expected soon.

Why this matters

The outcome could have wide-reaching consequences for businesses that have sold shares to raise funds for taxable operations.

• If the Supreme Court finds in favour of Hotel La Tour, businesses may be able to revisit past transactions and consider reclaiming VAT on similar professional costs.
• If the decision supports HMRC’s position, businesses that have previously reclaimed VAT on such costs may need to make adjustments.

In either case, there may be scope to review transactions from the past four years, which could result in significant VAT claims or repayments.

How Gravita can help

Our VAT team is monitoring developments closely. Once the judgment is released, we can:

• Review whether your business may be affected
• Assess whether a VAT reclaim or adjustment is required
• Support you in preparing any submissions to HMRC and ensure compliance

If you think your business might be affected by the outcome, please contact the VAT team so we can review your position as soon as the decision is announced.