HMRC loss in hotel case could mean savings for charities, says accountancy firm
Melanie May | 1 August 2023 | News
The results of a case between HMRC and a hotel firm could open the doors to businesses and charities recovering VAT that was previously thought to be non-recoverable, it has been suggested.
According to the case, Hotel La Tour (HLT) decided to construct a new hotel in Milton Keynes in 2015, partly financed by the sale of shares in a subsidiary which owned a hotel in Birmingham.
HLT engaged various companies to provide professional services, with a view to obtaining the highest sale price available.
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However, HMRC disallowed HLT’s input tax claim for the professional services saying the sale of shares in HLTB was an exempt supply and so the VAT on the professional services was directly and immediately linked to the exempt sale of shares.
Winning argument
HLT made the successful argument that the relevant services were directly and immediately linked to HLT’s downstream taxable activities, with the Upper Tribunal dismissing HMRC’s appeal.
Glyn Edwards, VAT and Indirect Tax Director at MHA, commented:
“Any business or organisation (like a charity) undertaking a VAT exempt activity aimed at raising funds, like selling shares or staging a fundraising event should take note of this ruling. It potentially allows them to recover VAT on purchases or expenses pursuant to these activities and the possible savings could be large.”
He adds:
“Deal costs can be significant. HLT incurred professional fees in the total amount of £382,899.51 plus VAT of £76,822.95. For many businesses or charities, making savings like this could be important in the current economic climate. Organisations that could benefit from this ruling include charities who may have the opportunity to recoup VAT costs from staging fundraising events.
“While the ruling brings exciting prospects, quick action is essential. Input tax claims fall under a 4-year time limit, meaning organisations need to act swiftly and maximise their chances for VAT recovery. HMRC may, of course, appeal the decision.”
About Melanie May
Melanie May is a journalist and copywriter specialising in writing both for and about the charity and marketing services sectors since 2001. She can be reached via thepurplepim.com.