UT erred on nuclear site capital allowances

In Urenco Chemplants Limited and Urenco UK Limited v HMRC [2022] EWCA Civ 1587, the Court of Appeal (CoA) found that the Upper Tribunal had erred in law when setting aside an earlier decision on whether certain expenditure on a nuclear deconversion facility qualified for capital allowances.

• Urenco Chemplants Limited and Urenco UK Limited (together, Urenco) form part of a corporate group that provides approximately 30% of the global enriched uranium supply for the civil nuclear industry.
• Urenco incurred £1bn of expenditure on the construction of a nuclear deconversion facility in Cheshire which safely processes a radioactive and highly toxic byproduct of uranium enrichment.
• While the capital allowance treatment of most of this expenditure was not in dispute, £192m was not accepted by HMRC as qualifying for Plant and machinery capital allowances.

Following the taxpayer’s appeals to the First Tier Tribunal (FTT) and Upper Tribunal (UT), both Urenco and HMRC Appealed to the Court of Appeal (CoA).

The CoA allowed all three of HMRC’s appeals, finding that the UT was wrong in law to:

• Set aside the FTT’s decision that most of the disputed assets did not, in principle, constitute ‘plant’ for the purposes of section 11 of CAA 2001.
  • The FTT had not erred in law. It had reached an evaluative conclusion which it was entitled to do so.
• Conclude that the part of the disputed expenditure attributable to the walls and first-floor slab of the vaporisation facility was ‘On the provision of’ plant or machinery.
  • The judge noted that it would be paradoxical if the walls and floor slab, which clearly formed part of the setting within which the items of equipment in the vaporisation facility operated, were to qualify as plant merely because steel supports for some of those items are fastened to them.
  • The natural conclusion was that this feature of the vaporisation facility reflected its role as a specialised setting for the operations carried out within it.
• Set aside the FTT’s decision on whether the disputed expenditure was on the provision of a building.
  • The FTT had made no material errors of law and had come to conclusions that it was fully entitled to reach.
  • The UT had over-complicated this part of the case. The errors of law it identified were no more than the FTT’s evaluative conclusions of fact and degree.

On Urenco’s cross-appeals, the CoA found that:

• The first ground of appeal, relating to Items 1 and 4 of List C should be allowed.
  • Urenco argued that Items 1 and 4 of List C apply to expenditure ‘on the provision of’ those items, and not merely to expenditure ‘on’ them, as was found by the UT.
  • The CoA remitted this point to the FTT to reconsider.
• The UT had not made an error in holding that Item 22 of List C (the alteration of land for the purpose only of installing plant or machinery) did not apply to the disputed assets on the facts found by the FTT.
  • Urenco’s second grounds of appeal was dismissed.

Useful guides on this topic

What expenditure qualifies for plant & machinery allowances?
What is plant and machinery? What expenditure qualifies as plant and machinery? What is treated as part of a building?

Plant & machinery: Allowances
What capital allowances are available on plant and machinery? How do you calculate them? What are qualifying activities?

Fixtures: Overview
What are fixtures? How do I claim lost or unclaimed fixtures? When must fixtures be pooled? 

Structures & Buildings Allowance (SBA)
Who can claim the Structures and Buildings allowance? What expenditure is eligible? How to make a claim? 

Expenditure on nuclear site was on structure and not plant
In Urenco Chemplants Ltd and Urenco UK Limited v HMRC [2019] TC7318, the First Tier Tribunal (FTT) found that expenditure on the cost of constructing a tails management facility at a nuclear site was structural and did not qualify for plant and machinery capital allowances.

External link

Urenco Chemplants Limited and Urenco UK Limited v HMRC [2022] EWCA Civ 1587