The Supreme Court (SC) has judged that tunnels built when a hydro-electric power station was constructed in Fort Augustus in Scotland by SSE Generation Limited were not tunnels for the purposes of claiming plant and machinery capital allowances against the company’s taxable profits.
The long-litigated case centred around the interpretation of a list within the capital allowance legislation that details items on which plant and machinery capital allowances cannot be claimed. The list of expenditure that doesn’t qualify for plant and machinery capital allowances included the items detailed as “a tunnel, bridge, viaduct, aqueduct, embankment or cutting”. The SC judged that the intention of Parliament was to disallow expenditure on transport related works and as the tunnels in the hydro-electric power station were not built for transport purposes then the expenditure was not disqualified. For a similar reason they were not aqueducts even though their purpose was to move water through the power station.
In many cases where business capital expenditure does not qualify for plant and machinery capital allowances then this expenditure can sometimes be deducted from taxable profits by the less generous structures and buildings allowance.
As a firm we are pleased with this decision as we feel further hydro-electric power stations will be required to help the UK decarbonise its electricity grid and achieve greater energy security. Confirmation that the more generous plant and machinery capital allowances can be claimed should help encourage further investment in this urgently required infrastructure.
The decision can be found at: Commissioners for His Majesty’s Revenue and Customs (Appellant) v SSE Generation Ltd (Respondent)- The Supreme Court
Determining what expenditure qualifies for capital allowances can be tricky as the above case highlights. 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.
