Input VAT recovery and fund-raising: where do we stand after Hotel La Tour Ltd?

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 mean faint hearts. Indeed it has recently been confirmed that HMRC will be seeking to take the case to the Court of Appeal.

In fairness to HMRC the law has performed something of a contortion act in this area over the years with the current configuration looking rather more positive for the taxpayer than had been the case relatively recently.

We now seem to...