The sale of shares is an exempt supply for VAT purposes, which means that input VAT on professional fees in connection with the transaction cannot be claimed. However, a recent tax tribunal decision has determined that, under certain circumstances, the input VAT may be claimed. The case concerned the sale of a subsidiary company in order to provide additional funds to complete the building of a new hotel within a hotel group. The taxpayer successfully argued that the costs had been incurred as part of raising funds for the group’s downstream activities generating taxable supplies.

HMRC may be appealing the decision, but in the meantime, companies in a similar position may seek to make protective claims to recover the input tax on professional fees.