The UK Supreme Court ruled on 15 January 2026 that VAT on professional costs incurred in connection with a VAT‑exempt share disposal is not recoverable, rejecting any general fundraising exception. The decision applies to corporate groups where the parent provides taxable management services to a subsidiary, confirming that share sales remain within the scope of VAT but exempt, and that VAT grouping does not alter this treatment. Taxpayers must therefore plan for non‑recoverable transaction costs when restructuring or disposing of subsidiaries.
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Key Takeaways
It ruled that VAT on professional costs incurred in connection with a VAT‑exempt share disposal is not recoverable, rejecting any general fundraising exception.
No, the Court explicitly rejected a general fundraising exception, stating recovery cannot be based on the intended use of proceeds.
Costs must have a direct and immediate link to the share sale itself; indirect links to the parent’s business do not justify recovery.
No, VAT grouping does not extinguish business activities; the share sale remains within the scope of VAT but exempt.
Transaction‑specific advisory and deal execution costs on share disposals are typically not recoverable, so careful budgeting for such costs is essential.
Primary source
Read the full article at MacfarlanesThis summary was published on VATfaqs.com on 15 January 2026. It relates to VAT developments in United Kingdom. The original source is Macfarlanes.
