As any VAT expert will tell you, VAT on costs can only be reclaimed where the costs have a direct and immediate link with a particular taxable supply, so where the costs relate to exempt activities or are not at all related to a taxable business activity, then the VAT on these costs is not reclaimable. This principle has been subject to much debate and litigation over the years resulting in the evolution of this basic concept and additional complexity for businesses having to decide how much VAT is deductible on restructuring and deal costs.
The recent Upper Tribunal case of HMRC v Hotel La Tour (‘HLT’) has shed some further light on this complex area and may provide a basis for businesses that have made share disposals, to revisit the value of VAT restriction they applied at the time.
Source: centurionvat.com
