Expenditure on studies relating to the design of windfarms

The taxpayers who were members of the same group each owned and operated an offshore windfarm for the generation and sale of electricity. They claimed capital allowances for expenditure incurred on studies and project management relating to windfarms.

HMRC refused the claim on the basis the expenditure was ‘too remote from’ and ‘not on the provision of’ the generation assets. It put the taxpayers in the position to incur expenditure on plant but was not actually spent on plant.

The First-tier Tribunal said it was accepted that the expression ‘on the provision’ extended beyond the price actually paid for the plant but the dispute concerned the limits of that extension. The taxpayers said that it extends to expenditure which directly related to the design of the plant or its installation since the design of the plant was as necessary to its provision as its fabrication. HMRC considered such expenditure...