Plant expenditure in hydroelectric scheme

SSE built a hydroelectric scheme in Scotland at a cost of £300m including rectification works. The company claimed capital allowances amounting to £260m on items of plant under CAA 2001 s 11. HMRC accepted only £34m and refused the rest on the basis they were disqualified under s 21 and s 22. The First-tier Tribunal allowed the taxpayer’s appeal. HMRC appealed against the findings in respect of the most substantial items. 

The Upper Tribunal said the case turned on statutory interpretation and the interpretation of several words used in CAA 2001: tunnel aqueduct installation and pipeline. The judges agreed with the First-tier Tribunal that these should be given their ordinary English meanings.

The judges said the function of list B in s 22 was to ‘draw the line in the sand’ between expenditure on assets that have the character of real estate or buildings or structures ...