On Wednesday 15 April, the Supreme Court announced their decision concerning the capital allowances case of HMRC v Ørsted West of Duddon Sands (UK) Ltd and others, finding in favour of HMRC’s position that expenditure incurred by the taxpayers on studies and surveys undertaken during the pre construction phase of their windfarm developments was not eligible for capital allowances tax relief. 

The Court concluded that these costs were too remote from the statutory requirement that expenditure be incurred 'on the provision of' plant and machinery. The studies and surveys in dispute included noise assessments, traffic and transport management studies, geophysical and geotechnical studies, archaeological surveys, telecommunications and radar interference assessments, marine wildlife studies, and ornithology and collision‑risk surveys.

What this means

The ruling has important implications for taxpayers, particularly those operating in capital‑intensive sectors such as energy and renewables, infrastructure and utilities, manufacturing and processing, and ports, transport and logistics.

HMRC is expected to rely heavily on this judgment in respect of current and potential future enquiries so it would be prudent to review the position for any existing claims made in recent years, to consider whether those positions remain robust in light of the Supreme Court’s decision. 

Notably, the judgment does not provide clear guidance on where the boundary lies between qualifying and non-qualifying expenditure. As a result, careful consideration and analysis will be required to assess whether claims remain technically defensible or whether proactive action may be required.

Recommended next steps 

If you have made capital allowances claims that include the types of fees referred to above, or are considering claims for current or future projects, our team would be pleased to discuss this further with you. We can provide support by reviewing existing claims or analysing expenditure on new projects with a focus on precise cost identification and robust fee apportionment, advising on the tax and accounting implications where claims may need to be amended, and reviewing financial models to ensure assumptions properly reflect the impact of the ruling.

Get in touch

If you would like to discuss the above in more detail, please contact myself or one of our specialists team, Robert Winters, Alison McGlashan or Vicki Smith, or by filling in the short form below.