- The UK Supreme Court ruled that Hotel La Tour Ltd could not recover input VAT on professional fees related to the sale of shares in its subsidiary, as these fees were directly linked to a VAT-exempt transaction.
- The Court found that input VAT on costs directly attributable to exempt supplies, such as share sales, is irrecoverable.
- The Supreme Court rejected the argument that exempt and out-of-scope transactions should be treated the same for VAT recovery, affirming that only out-of-scope transactions may allow VAT recovery as part of general business overheads.
- The decision clarifies that the principle of ‘fiscal neutrality’ is interpretative, not substantive law, and does not override the direct link test for VAT recovery.
Source: cadwalader.com
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
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