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

Where a statutory list groups words capable of more than one ordinary meaning, the grouping’s thematic connection forms part of the statutory context and may identify the meaning Parliament intended. In section 22 List B Item 1 of the Capital Allowances Act 2001, the theme is structures related to constructing transportation routes or ways.

Accordingly, a “tunnel” means a subterranean passage through an obstacle for a way to pass through. An “aqueduct” means a bridge-like structure for carrying water, including, but not limited to, a structure carrying a canal. Underground conduits whose function is to convey water are not brought within either term merely because broader dictionary meanings are available.

SSE Generation Ltd constructed and operated a hydro-electric scheme at Glendoe in Scotland. It claimed plant and machinery capital allowances for about £200 million spent on conduits, headrace and tailrace works, and associated underground tunnels used to collect, transmit and discharge water.

The First-tier Tribunal, [2018] UKFTT 416 (TC), held that none of the disputed items was a “tunnel”, but that several were “aqueducts”. The Upper Tribunal, reported at [2020] STC 107, held that the items were neither tunnels nor aqueducts. The Court of Appeal, [2021] EWCA Civ 105, reported at [2021] STC 369, agreed that neither expression covered the items.

The central issue was whether the disputed items were a “tunnel” or an “aqueduct” within section 22 List B Item 1 of the Capital Allowances Act 2001, thereby excluding the expenditure from capital allowances unless List C applied.

1. The appeal was dismissed unanimously. Lord Hamblen delivered the judgment, with which Lord Reed, Lord Briggs, Lord Leggatt and Lord Stephens agreed. The disputed items were neither “tunnels” nor “aqueducts” within section 22 List B Item 1 of the Capital Allowances Act 2001.

2. Where a word has two possible ordinary meanings, there is no presumption that Parliament intended the wider one. The statutory context must identify the intended meaning. The thematic connection explaining why structures were grouped together in List B was an important part of that context. The aim of drawing a clear boundary between qualifying and non-qualifying expenditure did not determine where Parliament drew that boundary. List C was also not intended to identify every structure capable of qualifying for allowances.

3. Item 1’s linking theme is structures related to constructing transportation routes or ways. A tunnel therefore means a subterranean passage through an obstacle for a way, such as a railway, road or canal, to pass through. This construction was consistent with List C Item 25 because an underground passageway can have the primary purpose of carrying utility conduits. It also gave separate work to the word “ducts” in that item.

4. In its statutory context, an aqueduct means a bridge-like structure for carrying water. Its position immediately after “bridge” and “viaduct”, together with Item 1’s transportation theme, supported that meaning. The term includes a bridge-like structure carrying a canal, but is not confined to canal-carrying structures. A broad meaning encompassing every water conduit would have little in common with the other Item 1 structures and would substantially duplicate canals, dikes and drainage ditches elsewhere in List B.

5. The Court of Appeal’s ultimate conclusion was upheld, although its definition of “aqueduct” was too narrow. Because the disputed assets fell outside both expressions, it was unnecessary to decide SSE’s alternative contention that List C preserved the allowances.

1. United Kingdom Supreme Court: The court unanimously dismissed HMRC’s appeal and upheld the Court of Appeal’s conclusion that the disputed items were neither tunnels nor aqueducts within section 22 List B Item 1 of the Capital Allowances Act 2001. It adopted a somewhat wider definition of “aqueduct” than the Court of Appeal.

2. Court of Appeal: In [2021] EWCA Civ 105, reported at [2021] STC 369, the court held that a tunnel was a passage through which people or vehicles were intended to travel and that an aqueduct was a bridge-like structure carrying a canal. It upheld the Upper Tribunal’s conclusion that none of the disputed items fell within either term.

3. Upper Tribunal: In the decision reported at [2020] STC 107, the tribunal held that none of the disputed items was a tunnel or an aqueduct.

4. First-tier Tribunal: In [2018] UKFTT 416 (TC), the tribunal held that none of the disputed items was a tunnel, but that several were aqueducts.