Costs considered expenditures “on the provision of” plant or machinery
The Court of Appeal held in Orsted West of Duddon Sands (UK) Ltd v HMRC that the taxpayer’s environmental and technical study costs for offshore windfarms qualified as capital expenditures under section 11 of the Capital Allowances Act 2001.
The court found that the taxpayer’s preliminary costs (e.g., on geotechnical surveys, environmental impact assessments, and metocean studies) were expenditures “on the provision of” plant or machinery. The court noted, however, that for such costs to qualify as capital expenditures, the project must actually be completed. The court also made a distinction between preliminary costs that inform whether a project should go ahead and preliminary costs that inform how a project is to go ahead, with the former not qualifying.
HMRC has applied to appeal the decision to the Supreme Court.
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