The Court of Appeal (CoA) has decided on a long running case concerning the ability of a taxpayer to claim capital allowances on various nuclear facilities constructed in Capenhurst, Cheshire by Urenco Chemplants Limited.
The case is complex, but the CoA affirmed that the approach to determine whether a structure was plant or premises by the First-tier Tribunal (FTT) was in all essence correct. The CoA had further guidance to hand by a later capital allowance case that was also decided by the CoA to modify the approach taxpayers should ask follow to determine whether an item is qualifying plant or a non-qualifying premises. The FTT summarised the approach as:
“(1) Plant can comprise large structural items.
(2) There is a distinction to be made between a structure which is merely the setting in which a trade is carried on and a structure which constitutes the apparatus with which the trade is carried on.
(3) The function of plant in a trade can be active or passive. For example, moveable partitioning might be said to perform its function passively but it may still be plant.
(4) Premises do not fall to be regarded as functioning as plant simply because they have been designed to satisfy the particular requirements of the business in question.
(5) A structure which is merely the setting in which a business is carried on is not plant.
(6) If a structure is both the setting and the means by which the business is carried on then it will be plant [where it is more appropriate to describe it as apparatus for carrying on the business or employed in the business than as the premises or place in or upon which the business is conducted. This is a question of fact or a question of fact and degree].
(7) An item that might otherwise be described as a building is likely to be a place in which the business is carried on and not plant, but not necessarily so.
(8) It is important to be careful and precise in analysing the function of the item for the purpose of distinguishing premises from plant.”
Note that the words in square parentheses [ ] at (6) have been added by us to indicate that the modification that has arisen since the FTT issued its decision by way of the CoA case (Cheshire Cavity) decided at a later date.
Helpfully, the CoA also decided that a drafting error had occurred when the tax rewrite project took place and that the scope for items for which capital allowance can be claimed is greater than that the words within the enacted legislation allow. This helpful as the CoA stated that capital allowances can be claimed on “the provision of” many differing assets (detailed in List C at section 23 of the Capital Allowances Act 2001), rather than just “on”, meaning transport costs and other directly related ancillary costs are also eligible for capital allowances.
The decision can be found at: Urenco Chemplants Ltd & Anor v Commissioners for His Majesty’s Revenue And Customs [2022] EWCA Civ 1587 (01 December 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.
