Key points
- HMRC will appeal the Upper Tribunal’s decision in Hotel La Tour to the Court of Appeal.
- Input VAT with a ‘direct and immediate link’ to an onward taxable supply may be recovered in full.
- As a result of the decision HMRC’s appeal will have to be borne in mind before taxpayers draw up plans to spend any VAT windfall and protective claims should be considered.
There is a spectre haunting the world of VAT: it is the spectre of increased input VAT recovery. The decision in July in the case of Hotel La Tour Ltd v CRC [2023] STC 1440 (HLT) has unleashed this spirit on both taxpayers and HMRC with potentially significant implications.
When an Upper Tribunal (UT) describes a First-tier Tribunal (FTT) decision as ‘unimpeachable’ the appellants’ hearts must sink. When that appellant is HMRC however sinking hearts do not necessarily...