Preliminary studies were qualifying costs

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

HMRC refused the claim. The First-tier Tribunal partly allowed the taxpayers’ appeal holding that the expenditure on the studies was capital and that some of it qualified for capital allowances. The Upper Tribunal agreed that the expenditure was capital but ruled that none of it was allowable. The companies appealed.

The Court of Appeal looked first at whether the expenditure was on the provision of plant. It concluded that qualifying expenditure would encompass the costs of design as well as those of installation and that the eligible expenditure will extend to costs of studies which informed such installation or design. The judge said it was unclear as to...