The Supreme Court has unanimously dismissed the appeal by Hotel La Tour Ltd (HLT) against HMRC, holding that VAT on professional fees incurred to assist with the sale of HLT’s subsidiary is not deductible as input tax. The Court concluded that VAT on the fees were ‘directly and immediately linked’ to the VAT exempt sale of shares in its subsidiary rather than to HLT’s taxable general economic activities and therefore was not deductible input tax for VAT purposes. The judgment clarifies the limits of VAT recovery on corporate transactions where companies rely on share disposals to generate capital for new commercial developments. Practitioners observe that this judgment reinforces the restrictive approach to input tax recovery on deal-related costs. As well as summarising the decision, this News Analysis contains commentary from Jivaan Bennett, a barrister at Temple Tax Chambers, on the implications of the judgment..

The Supreme Court has unanimously dismissed the appeals brought by HMRC and the individual members of HFFX LLP, holding that section 850 of the Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005) applies only where a partner has a contractual right to a share of a firm’s profits during the relevant accounting period. The Supreme Court held that indicative allocations of profits under HFFX LLP’s deferred remuneration arrangements did not constitute profit shares for the purposes of ITTOIA 2005, s 850 because the individual members had no contractual entitlement to receive them. The Supreme Court also held that payments of Special Capital made under those arrangements constituted income from a ‘source’ within the meaning of ITTOIA 2005, s 687 and were therefore chargeable to income tax as miscellaneous income. As well as summarising the decision, this News Analysis contains commentary from Helen McGhee, partner at Joseph Hage Aaronson & Bremen LLP, on the implications of the judgment.

The Supreme Court has unanimously allowed the appeal by Emotional Perception AI Ltd against the Comptroller-General of Patents, Designs and Trade Marks, holding that the claimed artificial neural network (ANN) system is not excluded from patentability as a ‘program for a computer... as such’. The court concluded that although an ANN constitutes a computer program, the claims were not excluded because they involved the use of hardware and therefore possessed the requisite technical character. In doing so, the court departed from the long–standing Aerotel approach and endorsed the ‘any hardware’ approach developed by the European Patent Office (EPO). The case has been remitted to the UK Intellectual Property Office (UKIPO) to apply the newly adopted framework. The judgment marks a significant realignment of UK patent law with EPO jurisprudence in relation to computer-implemented inventions. As well as summarising the decision, this News Analysis contains commentary from Bruce C Dearling, an attorney at Hepworth Browne, on the implications of the judgement.

Tax analysis: The Supreme Court unanimously allowed HMRC’s appeal, ruling that Northumbria Healthcare NHS Foundation Trust was not acting under a ‘special legal regime’ (SLR) when operating its hospital car parks and was therefore required to charge VAT. The court clarified that external guidance, combined with the general public law obligation to adhere to it in the absence of good reason, was insufficient to amount to an SLR. As well as summarising the decision, this News Analysis contains commentary from Bryn Reynolds, Partner at Pinsent Masons LLP, on the implications of the judgment.

The Supreme Court unanimously allowed HMRC’s appeal, holding that expenditure on environmental surveys and studies undertaken in connection with the development of offshore windfarms did not qualify for capital allowances. The Court concluded that the expenditure was not incurred ‘on’ the provision of plant (within the meaning of section 11(4) of the Capital Allowances Act 2001 (CAA 2001), as it lacked the requisite close connection to the plant itself. Instead, the expenditure was only tangentially related to the provision of the windfarm assets and therefore fell outside the scope of qualifying capital expenditure. The judgment clarifies the narrow interpretation to be applied to the statutory requirement that expenditure be incurred ‘on’ the provision of plant, rejecting broader constructions based on necessity or commercial purpose. The decision reinforces a restrictive approach to capital allowances in large infrastructure projects, particularly where preparatory or investigatory costs are concerned.

Property Disputes analysis: In a leapfrog appeal from the Upper Tribunal (Lands Chamber) the Supreme Court has interpreted paragraph 5(4)(c) of Schedule 6 to the Land Registration Act 2002 (LRA 2002) to require that an applicant for registration of title to land on the basis of adverse possession must only demonstrate that they held a reasonable belief that the land in question belonged to them during some (any) continuous ten-year period of their possession arising before the date the application was made. The decision of the Court of Appeal in Zarb v Parry was wrong in assuming a different construction of the statute which was unworkable in requiring the applicant to demonstrate a period of reasonable belief that ended on the very date the application was made. Written by Tiffany Scott KC, barrister at Wilberforce Chambers.

The Supreme Court has unanimously allowed the appeal in Barclays Bank v Various Claimants on the grounds that the Bank could not be vicariously liable for someone who was an independent contractor. Katie Ayres, barrister at 1 Chancery Lane, who represented Barclays Bank alongside Lord Faulks QC, discusses the judgment, highlighting that it is ‘a definitive "book-end" to the expansionary decisions’ in previous vicarious liability cases.

Public Law analysis: In Mercer the Supreme Court unanimously held that section 146 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA 1992) could not be interpreted compatibly with Article 11 of the European Convention of Human Rights (ECHR) under section 3 of the Human Rights Act 1998 (HRA 1998) to provide employees and workers who have participated in lawful industrial action and who are subsequently subjected to action short of dismissal with a remedy in UK law. The Supreme Court also issued a declaration of incompatibility under HRA 1998, s 4. The implications of the decision in Mercer are stark for workers, employees and employers. Workers and employees participating in lawful industrial action during working hours and without their employer’s consent and who are subsequently subjected to detriments short of dismissal have no protection in UK law under TULRCA 1992, s 146. As such, until the legislation is amended, while reputationally unwise and possibly in breach of the implied term of mutual trust and confidence, private sector employers are free to sanction employees or workers with sanctions short of dismissal, such as providing disciplinary warnings, suspension or withdrawing discretionary benefits, albeit in the knowledge they might be breaching the striking employee or worker’s Article 11 ECHR rights. Written by David Reade KC, Lucy Bone and Georgina Churchhouse at Littleton Chambers.

The Supreme Court has unanimously dismissed the appeal, holding that ‘necessity’ applies to both the purposes in section 13(1)(a) and (b) of the Inquiries Act 2005 (IA 2005) and to the period of suspension. Piers Doggart, Legal Director at Eversheds Sutherland, Scott Wortley, Lecturer in private law at the University of Edinburgh, and Carl Gardner, Professional Support Lawyer in the Public Law team at LexisNexis discuss the implications of the judgment.

The Supreme Court has allowed an appeal by a majority (Lord Burrows dissenting) affirming that a defendant is liable in dishonest assistance for assisting a fiduciary who has made unauthorised profits in breach of their fiduciary duties to dissipate those profits to the detriment of the company. James Pickering KC, barrister at Enterprise Chambers, Christopher Parker KC, barrister at Maitland Chambers, and Eleanor Temple KC, barrister at Kings Chambers, comment on the implications of the judgment.

Tax analysis: In Cobalt Data Centre 2 LLP and another, the Supreme Court dismissed the taxpayers’ appeal, holding that the two LLPs were not entitled to 100% enterprise zone allowances in respect of the construction of two data centres.

STM Group Plc has announced that the Supreme Court has rejected its application for permission to appeal the judgment of the Court of Appeal in the long-running case of Adams v Options UK Personal Pensions LLP (formerly Options Sipp UK LLP and Carey Pensions UK LLP) (Financial Conduct Authority intervening). The Court of Appeal ruled against STM Group last year in the landmark judgment and found in favour of the claimant (Russell Adams), who had lost money in an unregulated high-risk investment through a self-invested personal pension.