Commissioners for His Majesty's Revenue and Customs (Respondent) v Hotel La Tour Ltd (Appellant)

Hearing listed

Case summary
Appeal

Case summary

Case ID

UKSC/2024/0086

Parties

Appellant(s)

Hotel La Tour Limited

Respondent(s)

Commissioners for His Majesty's Revenue and Customs

Issue

Can Hotel La Tour Ltd, the representative company of the Hotel La Tour Group which carries on the taxable business of providing hotel accommodation, recover input tax incurred in connection with a sale of shares in its managed subsidiary, Hotel La Tour Birmingham Ltd?

Facts

Hotel La Tour Ltd (“HLT”) is a holding company which owned the share capital of Hotel La Tour Birmingham Ltd (“HLTB”). HLT and HLTB formed a VAT group with HLT as the representative member. HLT provided services to HLTB to support its operation of a luxury hotel in Birmingham. In July 2017, HLT sold the shares in HLTB for £4,812,231.24, together with an undertaking from the purchaser to put HLTB in funds to repay its borrowings from HLT and to repay its bank borrowings. The net amount received by HLT as a result of the share sale was £16,000,000. The purpose of the share sale was to fund HLT’s development in Milton Keynes. HLT engaged various third parties to provide professional services to assist with the share sale including market research, buyer shortlisting, financial modelling and tax compliance (the “Services”) which cost HLT £382,899.51 plus VAT of £76,822.95. HLT filed its 09/17 VAT Return seeking repayment of the input tax incurred on the Services. His Majesty’s Revenue and Customs (“HMRC”) commenced enquiries and concluded that HLT was not entitled to repayment of that input tax, upholding that conclusion on internal review. HLT appealed to the First-tier Tribunal (“FTT”) which allowed the appeal on the basis that, objectively ascertained, the purpose of the share sale was to fund HLT’s taxable general activities (namely the Milton Keynes development). The input tax incurred on the Services, which represented a cost of the taxable general activities, was therefore deductible. The Upper Tribunal upheld the FTT’s conclusion on appeal. However the Court of Appeal overturned the tribunal decisions and allowed HMRC’s appeal. HLT now appeals to the Supreme Court.