Commissioners for His Majesty’s Revenue and Customs v SSE Generation Ltd

The Supreme Court decided the statutory meaning of the words "tunnel" and "aqueduct" in List B Item 1 of section 22 of the Capital Allowances Act 2001. Applying ordinary meaning in context, the court held that "tunnel" in that provision denotes a subterranean passage that is a passageway for a way (that is, intended to permit persons or vehicles to pass through), and that "aqueduct" in the same provision denotes a bridge-like structure for carrying water (including but not limited to canal-carrying structures). On that basis the items forming part of the Glendoe hydro-electric scheme were not tunnels or aqueducts within List B Item 1 and the disqualification in section 22 did not apply. The court therefore dismissed the appeal by HMRC. The court considered the surrounding statutory grouping and purpose, assessed competing ordinary meanings from dictionaries, and rejected HMRC's argument that the statutory words must be given an unrestricted meaning so as to capture all conduits carrying water or utilities.

Background and parties:

• The dispute concerned the Glendoe hydro-electric scheme near Fort Augustus in Scotland, constructed by SSE Generation Ltd (SSE). The disputed capital expenditure was substantial (around £200 million) and related to conduits, the headrace, tailrace, turbine outflow tunnel and associated dewatering/drainage tunnels, some of which are underground.
• HM Revenue & Customs (HMRC) appealed to the Supreme Court against the Court of Appeal's decision that the disputed items were not excluded from plant and machinery allowances by List B Item 1 of section 22 of the Capital Allowances Act 2001 (the CAA).

Nature of the appeal and relief sought:

• HMRC sought to establish that the disputed items fell within the List B exclusion in section 22 (Item 1: "a tunnel, bridge, viaduct, aqueduct, embankment or cutting") so that SSE's expenditure would not qualify for plant and machinery capital allowances. SSE maintained the items did not fall within Item 1 and, alternatively, relied on List C protections.

Issues framed:

1. What is the proper statutory meaning of "tunnel" in List B Item 1 of section 22 of the CAA?
2. What is the proper statutory meaning of "aqueduct" in List B Item 1 of section 22 of the CAA?
3. Whether the disputed Glendoe items fall within those meanings so as to be excluded from capital allowances.

Procedural history: The case came on appeal from the Court of Appeal, which had upheld the Upper Tribunal's decision, the Upper Tribunal having reviewed the First-tier Tribunal's findings.

Court's reasoning:

• The court began from ordinary dictionary meanings but emphasised that words derive meaning from their statutory context. It examined the grouping of items in List B and identified a transportation/way-related theme among the terms in Item 1 and adjacent items listing means of movement.
• On that basis the court held that in context "tunnel" is best understood as a subterranean passage for a way (i.e. a passage allowing people or vehicles to pass), not a generic conduit for any substance or utility. That ordinary meaning was selected over competing senses because the statutory grouping points to structures related to transportation routes or ways.
• For "aqueduct" the court acknowledged competing ordinary meanings (a general conduit for conveying water and a bridge-like structure carrying water). In context it preferred the bridge-like meaning (a structure for carrying water across a gap), while allowing a somewhat broader sense than the Court of Appeal's narrower canal-only meaning. It rejected HMRC's contention that "aqueduct" must be read as any conduit for water.
• The court concluded that, applying those contextual meanings, the disputed Glendoe items were not "tunnels" or "aqueducts" within List B Item 1. It therefore found it unnecessary to consider SSE's alternative reliance on List C Item 25.

Disposition: The Supreme Court dismissed HMRC's appeal and upheld the Court of Appeal's decision.

This was an appeal by HMRC. The Supreme Court dismissed the appeal. The court held that, in the context of List B Item 1 of section 22 of the Capital Allowances Act 2001, "tunnel" denotes a subterranean passage intended to permit a way to pass through (for persons or vehicles) and "aqueduct" denotes a bridge-like structure for carrying water. Applying those contextual meanings, the disputed Glendoe items were not "tunnels" or "aqueducts" within List B Item 1 and so were not excluded from plant and machinery capital allowances.

First-tier Tribunal: [2018] UKFTT 416 (TC); Upper Tribunal: [2020] STC 107; Court of Appeal: [2021] EWCA Civ 105, reported [2021] STC 369; appeal to the Supreme Court from the Court of Appeal decision.