In HM Revenue and Customs v SSE Generation Ltd [2019] UKUT 0332, the Upper Tribunal upheld the First Tier Tribunal decision that certain items of expenditure on plant qualified for capital allowances and extended allowances available to items previously disallowed.

In SSE Generation Ltd v HMRC,  the FTT held that some of the expenditure on constructing and remediating a hydroelectric power scheme near Loch Ness was eligible for Plant and Machinery capital allowances, the rest was specifically excluded by CAA 2001.

HMRC appealed to the Upper Tribunal (UT) in respect of the higher cost allowable items. 

There was much discussion in the UT on the interpretation and purpose of s22 CAA, which disallows expenditure on:

  • the provision of a structure or other asset in list B (excluded structures such as tunnels, aqueducts, bridges), or
  • any works involving the alteration of land.

HMRC claimed the ‘works on the alteration of land’ clause, is a general sweep-up provision for when an item of expenditure is not held to be on the provision of a structure.

The UT disagreed; this was not parliament's intention and suggested that the correct approach is:

  • to consider whether the structure or asset falls within any of the specified structures or assets in List B.
    • If it does, the expenditure is disallowed unless s 22 is disapplied because the expenditure is on any of items on List C (items not affected by s22).

There is no separate consideration whether the construction of the structure involved the alteration of land.

The UT said words within the Capital Allowances Act 2001 should be given their ordinary meaning. They disagreed with some of the ordinary meanings adopted by the FTT which were errors of law, but this did not affect the overall result as to what was and was not eligible expenditure.

The appeals were dismissed for all but one item disallowed by the FTT, which the UT found was eligible for allowances.

Both tribunal decisions were lengthy, exploring the meaning of the CAA provisions in some detail. The average capital allowance claim will not be as complex as this but the case does reinforce that details matter; businesses should ask contractors for detailed breakdowns of the costs of any building works at the time to ensure claims can be maximised.

Links to our guides

Plant and machinery (companies): allowances

What expenditure qualifies for plant and machinery allowances

Annual Investment Allowance (AIA) 

External link:

HM Revenue and Customs v SSE Generation Ltd: [2019] UKUT 0332

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