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Direct and immediate link not broken by share transaction

29 July 2023
Issue: 4899 / Categories: Tax cases
CRC v Hotel la Tour Ltd, Upper Tribunal (Tax and Chancery Chamber), 24 July 2023

The taxpayer Hotel La Tour Ltd (HLT) owned the entire share capital in Hotel La Tour Birmingham (HLTB) which owned and operated a hotel in Birmingham. Both were members of a VAT group of which HLT was the representative member.

HLT wished to build a new hotel in Milton Keynes. It decided to sell HLTB to finance the development because it was deemed that HLTB’s business was unlikely to grow any further.

In May 2017 the shares in HLTB were sold and HLT began building the new hotel.

In its 9/17 VAT return HLT claimed input VAT in relation to professional services incurred on the share sale. HMRC refused the claim on the basis that the sale was exempt so the professional fees were used in making an exempt supply rather than in making taxable supplies.

The First-tier Tribunal upheld HLT’s appeal concluding...

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