Orsted West of Duddon Sands (UK) Limited (now named Orsted Schroders Greencoat WODS Holdco Limited) and others v Commissioners for His Majesty’s Revenue and Customs

Capital expenditure is incurred “on the provision of” plant or machinery under section 11(4)(a) of the Capital Allowances Act 2001 only where there is a close connection between the expenditure and the plant provided. The purchase price ordinarily qualifies, as may transport, installation and other costs inherent in providing the plant.

Expenditure on studies and surveys which advises a business how to choose, design or install plant falls outside that statutory boundary. It is insufficient that the information was necessary for, or informed, the design of plant later constructed. Neither the incentive to invest nor the accounting treatment of expenditure justifies expanding the statutory language. Whether final technical drawings, or work undertaken during fabrication or installation, qualifies remains a fact-sensitive question.

The respondents owned and operated four offshore windfarms. They claimed capital allowances for expenditure on environmental, geophysical, geotechnical and other studies undertaken while planning and designing the windfarms. It was accepted that the generation assets collectively constituted plant, that the disputed expenditure was capital, and that the information was needed to design and construct the windfarms.

The First-tier Tribunal allowed the taxpayers’ appeals in part: [2022] UKFTT 35 (TC). The Upper Tribunal held that none of the disputed expenditure qualified: [2023] UKUT 260 (TCC). The Court of Appeal allowed the taxpayers’ appeal, holding that studies which objectively informed the design or installation of plant subsequently acquired or constructed qualified: [2025] EWCA Civ 279; [2025] 1 WLR 3887.

The issue before the Supreme Court was whether the expenditure was capital expenditure “on the provision of plant” within section 11(4)(a) of the Capital Allowances Act 2001.

1. The appeal was allowed unanimously. Lady Rose delivered the judgment, with which Lord Lloyd-Jones, Lord Hamblen, Lord Burrows and Lord Richards agreed. The disputed surveys and studies did not constitute expenditure “on the provision of” plant within section 11(4)(a) of the Capital Allowances Act 2001.

2. The word “on” imposes a narrow test requiring a close connection between the expenditure and the plant provided. It creates a materially closer nexus than expressions such as “in connection with”, “relating to” or “with a view to”. The primary qualifying expenditure is the purchase price of the plant. Transport and installation may also qualify because they are inherent in the concept of providing plant.

3. Inland Revenue Comrs v Barclay, Curle & Co Ltd [1969] 1 WLR 675 did not establish that every necessary preliminary or every item informing design qualifies. The excavation expenditure qualified because the lined basin was itself an integral part of the dry dock regarded as a single item of plant. It did not support a general necessity or design-information test.

4. Ben-Odeco Ltd v Powlson [1978] 1 WLR 1093 supported the narrower construction. Its principal reasoning concerned the lack of proximity between financing costs and the provision of the rig. The statutory boundary is drawn around the plant and its provision, rather than around every cost which enables the taxpayer to acquire it.

5. Costs of studies and surveys giving advice about how to choose or design plant fell well outside that boundary. It was insufficient that the information informed the design or was needed before the windfarm could be built. The Court of Appeal’s test improperly extended relief to preparatory information, including information which produced no alteration to the design.

6. The composition of a supplier’s price did not support a wider rule. The relevant question concerned the character of the purchaser’s expenditure. There was no need to dissect a purchase price according to the supplier’s capital costs, revenue costs, overheads or profit.

7. The context and purpose of the capital allowance regime reinforced the narrow construction. Writing-down allowances principally reflect depreciation of capital assets. A general aim of encouraging investment could not determine the precise statutory boundary, and commercial accounting treatment could not control the construction of the legislation.

8. The court expressed no view on expenditure for final technical drawings and specifications used by a manufacturer to fabricate plant. Surveys undertaken during final fabrication or installation might qualify where they formed part of production or installation, but none of the disputed studies had that character.

1. United Kingdom Supreme Court: The court unanimously allowed HMRC’s appeal and held that none of the disputed survey and study expenditure qualified under section 11(4)(a) of the Capital Allowances Act 2001: [2026] UKSC 12.
2. Court of Appeal: The court allowed the taxpayers’ appeal and held that all the disputed expenditure qualified: [2025] EWCA Civ 279; [2025] 1 WLR 3887.
3. Upper Tribunal: The tribunal allowed HMRC’s appeal and held that none of the disputed expenditure qualified: [2023] UKUT 260 (TCC); [2024] STC 177.
4. First-tier Tribunal: The tribunal allowed the taxpayers’ appeals in part, holding that expenditure on studies directly related to necessary design, construction or installation qualified: [2022] UKFTT 35 (TC); [2022] STI 249.