Capital Allowances in the Supreme Court

Commissioners for His Majesty’s Revenue and Customs v SSE Generation Ltd [2023] UKSC 17

The Supreme Court has held, in a decision handed down on 17 May 2023, that certain constituent elements of the Glendoe hydroelectric power station which remained in dispute following the decision of the First-tier Tribunal were neither a “tunnel” or an “aqueduct” for the purposes of Capital Allowances Act 2001 section 22 List B Item 1 such that they attracted capital allowances for plant. The First-tier Tribunal had determined that some items of significant value were disqualified for allowances, for example the Power Cavern and the Transformer Cavern. SSE did not appeal those decisions.

The Supreme Court, holding that the Disputed Assets were not “tunnels”, agreed with the Court of Appeal and the Tribunals below that, in context, “tunnel” in Capital Allowances Act 2001 section 22 List B Item 1 was limited to a subterranean passage through an obstacle for a way (such as a railway, road or canal) to pass through (Judgment [36]). It did not extend to underground passages created by SSE for transmission of water.

Holding that an “aqueduct” in Capital Allowances Act 2001 section 22 List B Item 1 refers to a bridgelike structure for carrying water, which includes but is not limited to carrying a canal, the Supreme Court upheld the conclusion of the Court of Appeal and the Upper Tribunal, modifying, on appeal, the approach to “aqueduct” in one regard. It is not easy to see what Parliament can have intended when disqualifying “aqueducts” for capital allowances. Aqueducts based on the shapes of classical antiquity are not, in modern times, constructed for use in the course of a trade.

Timothy Brennan KC and Aparna Nathan KC appeared for the Appellants.

The Judgment is available here.

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