Urenco Chemplants Limited & Anor v The Commissioners for His Majesty's Revenue and Customs

This appeal concerns the availability of capital allowances for expenditure on a specialised nuclear "Tails Management Facility" (TMF) at Capenhurst. The statutory framework in issue was the Capital Allowances Act 2001 (CAA 2001), in particular section 11 (general conditions for plant and machinery allowances), section 21 (exclusion for expenditure on the provision of a building), section 22 (structures and works) and section 23 (List C exceptions). The principal legal questions were (i) whether particular components of the TMF were "plant" for the purposes of section 11 or merely premises, (ii) whether expenditure on those items was expenditure "on the provision of" plant within section 11, and (iii) the proper construction of List C items in section 23, notably Items 1 and 4 ("machinery" and "manufacturing or processing equipment") and Item 22 (alteration of land for the purpose only of installing plant or machinery).

The First-tier Tribunal (FTT) found most disputed items were not plant and that the expenditure was excluded by section 21 as expenditure on buildings. The Upper Tribunal (UT) identified legal errors in the FTT's approach to the "plant" and "building" issues and remitted those issues to the FTT, but rejected Urenco's List C arguments. On further appeal, the Court of Appeal (by the leading judgment of Sir Launcelot Henderson with whom the other members agreed) concluded that the UT was wrong to disturb the FTT's evaluative findings on which disputed items were plant or premises and on the walls and first-floor slab of the vaporisation facility; accordingly HMRC's appeals on those points were allowed. The court also held that List C Items 1 and 4 should be construed so as to preserve expenditure "on the provision of" such items (remedying an apparent drafting/transposition defect inherited from predecessor legislation), so Urenco's cross-appeal on that point was allowed and the matter remitted to the FTT; but the court rejected Urenco's broad construction of Item 22 and dismissed that cross-appeal.

Background and parties: Urenco (Urenco Chemplants Ltd and Urenco UK Ltd) constructed a specialised TMF to deconvert highly toxic and radioactive "Tails". Disputed capital allowance claims of about £192m for accounting periods 2011–2015 were the subject of appeals by Urenco against HMRC determinations. The FTT dismissed Urenco's claims; the UT set aside parts of the FTT decision on legal grounds and remitted certain issues; both parties appealed to the Court of Appeal.

Nature of the claims and relief sought: Urenco sought plant and machinery allowances under section 11 CAA 2001 for capital expenditure on components of the TMF. HMRC denied relief on the basis that the expenditure was not "on the provision of plant or machinery" and in any event was excluded as expenditure on the provision of a building under section 21, subject to List C carve-outs in section 23.

Issues for the court:

• Whether the disputed structures and items were "plant" within section 11 or were premises (the "premises test").
• Whether certain expenditure (notably walls and a first-floor slab in the vaporisation facility) was expenditure "on the provision of" plant for section 11 purposes.
• How List C should be construed: whether Items 1 and 4 protect expenditure "on the provision of" the listed assets as well as expenditure "on" them; and whether Item 22 covers alterations of land (including buildings/structures) where those alterations were said to be solely for installing plant.

Court's reasoning (concise): The court reiterated the established legal framework: (i) the section 11 threshold requires expenditure to be "on the provision of plant or machinery"; (ii) if that threshold is met, sections 21–23 may still exclude or save categories of expenditure; and (iii) whether an item is plant is a fact-sensitive evaluative question (the "premises test") to be assessed against authorities such as Wimpy, Carr v Sayer, Barclay, Curle and more recent guidance in Cheshire Cavity. The Court of Appeal emphasised deference to the specialist tribunal's evaluative findings absent material legal error.

On the plant/premises issue, the Court concluded that the FTT had identified and applied the legal principles correctly and that the UT erred in substituting its own view where the FTT's evaluative approach was open to it; HMRC's appeal on that point was therefore allowed. On the walls and first-floor slab of the vaporisation facility, the court held the FTT was entitled to treat them as premises-related and not as expenditure "on the provision of" plant merely because some steel supports for pipework were fixed to them. On List C Items 1 and 4 the court identified a drafting/transposition defect when Schedule AA1 of the Finance Act 1994 was merged into CAA 2001; construing the text purposively and by reference to the predecessor enactment, it held that Items 1 and 4 should be read as preserving expenditure "on the provision of" those items and remitted that question to the FTT. On Item 22 the court adopted a restricted meaning of "installation" (installation as integration of separate items) and rejected Urenco's wide construction, so Item 22 did not save the contested expenditure.

This court allowed HMRC’s appeal in part by restoring the FTT’s evaluative conclusions on the plant/premises question and on the walls and first-floor slab of the vaporisation facility (the FTT was entitled to treat those as premises or not expenditure "on the provision of" plant). The court also allowed Urenco’s cross-appeal in part by construing List C Items 1 and 4 as protecting expenditure "on the provision of" the listed machinery and processing equipment (remedying a drafting/transposition defect) and remitted the List C (Items 1 and 4) questions to the FTT for reconsideration; Urenco’s cross-appeal on Item 22 was dismissed because "installation" must be read narrowly and the sole-purpose test was not satisfied on the facts found by the FTT.

Appeal from the Upper Tribunal (Tax and Chancery Chamber) [2022] UKUT 00022 (TCC), itself an appeal from the First-tier Tribunal (Tax Chamber) [2019] UKFTT 522 (TC). Both parties appealed aspects of the UT decision to the Court of Appeal; the Court allowed HMRC's appeals on the plant/premises and related "provision of" questions and allowed Urenco's cross-appeal on the construction of List C Items 1 and 4, remitting that issue to the FTT.