Input tax on costs of sale of subsidiary company

Where a holding company sells shares in a subsidiary it makes supplies which are exempt from VAT - except where a case can be made that the sale is outside the scope of VAT. What is the VAT recovery status of costs incurred in making this sale?  This is a difficult question.

The case of Hotel La Tour (TC08335) deals with a situation where the subsidiary that was sold was the operating company of a hotel. The holding company was VAT-grouped with the subsidiary, so the ‘taxable person’ made taxable supplies, and the holding company also sold management and staff supplies (within the group) to the subsidiary prior to its sale.

The holding company was found as a fact to have sold the shares in order to raise capital to invest in a different hotel, and that the proceeds were not intended to realise funds to pay dividends or to pursue an activity that was non-taxable. It appears that this intended use of the sale proceeds was the sole purpose of the sale.