The Court of Appeal (CoA) has decided on a case whether cavities created in land for the purpose of storing gas for trading were plant and therefore expenditure incurred on their creation was qualifying for capital allowances.  Both lower tribunals had found in favour of HMRC that the cavities were not plant but were premises, the First-tier Tribunal and the Upper Tribunal.

The CoA concluded that the lower courts had correctly applied the ‘premises test’ and that as this was an evaluative question there was little room for the CoA to wade in.  The CoA confirmed that the premises test is a question of fact and a question of fact and degree.  The premises test requires consideration of a structure as to whether it is premises or plant and consideration of the function of the structure, either in whole or in part.

As the CoA concluded that the lower courts had correctly applied the premises test the appeal was dismissed and claims for capital allowances denied.

The case can be found at: Cheshire Cavity Storage 1 Ltd & Anor v Commissioners for Her Majesty’s Revenue and Customs [2022] EWCA Civ 305 (10 March 2022) (bailii.org)

Determining what expenditure qualifies for capital allowances can be tricky as the above case highlights, though the CoA have helpfully provided clarity.  We are very experienced with this subject matter and can help you plan expenditure to take advantage of these very generous tax deductions.  Please do contact us if you would like assistance.