CA95010 - Orsted West of Duddon Sands (UK) Limited and others v Commissioners for HMRC
Orsted West of Duddon Sands (UK) Limited and others v Commissioners for HMRC [2026] UKSC 12 (formerly known as the Gunfleet Sands case)
Case Summary
The four companies in this case are all members of a group which own and operate offshore windfarms. The case concerned expenditure on studies and surveys undertaken to identify and assess potential windfarm sites and whether these costs qualify for plant and machinery allowances (PMA) under section 11(4) of the Capital Allowances Act 2001 (S11(4)), as being “on” the provision of plant or machinery.
Some of these works were required by regulators to evaluate environmental impacts and were carried out before the windfarms were designed, constructed or brought into use.
Before reaching the Supreme Court (SC) it had been settled that the wind turbines and connecting cables (known as ‘array cables’) were a single item of plant.
The judgment
In delivering the judgment Lady Rose concluded at [100]:
I do not regard these studies and surveys as close to the boundary between what should be regarded as “on” plant and what is too far away from the plant itself to be so regarded. They do not fall within the statutory wording.’ The SC confirmed that there are limits to what expenditure can qualify as being incurred for PMA purposes under section 11(4) Capital Allowances Act 2001.
At [74] Lady Rose explained:
...looking first at the ordinary meaning of the words used in the context of section 11(4)(a), I agree with the Upper Tribunal that the requirement that the expenditure must be “on” the provision of plant indicates a narrow test, requiring a close connection between the expenditure and the plant provided.
She explained further that phrases used in other statutory provisions:
...connote a much looser nexus such as “in connection with” or “relating to” or “with a view to”. Those phrases do not mean the same as “on”.
Lady Rose expanded on this at [85] adding:
The “limiting curve” as Lord Wilberforce put it in Ben-Odeco is around the plant and the provision of it. The costs, commonly incurred, of carrying out studies and surveys which provide the business with advice about how to choose or design plant fall…well outside the limiting curve.
HMRC’s view
The judgment provides clear confirmation of HMRC’s view that expenditure on preparatory studies and surveys of this kind do not qualify for PMAs. The Court found that such costs were not sufficiently closely connected to the actual provision of the plant.
In reaching this conclusion, the SC reaffirmed that “plant” means the apparatus with which a business is carried on, and that whether expenditure is incurred "on" the provision of plant depends on the facts and circumstances of each case.
The judgment does not establish a new general principle or test for determining when expenditure is incurred the provision of plant and machinery, endorsing the earlier cases of Inland Revenue Commissioners v Barclay Curle [1969] 1 WLR 675 and Ben-Odeco Ltd v Powlson (Inspector of Taxes) [1978] 1 WLR 1093.
It confirms that not all capital expenditure qualifies for PMA, even when this expenditure is necessary for a project to proceed.
As a result, decisions in this area will continue to be highly fact-specific, and the boundaries of section 11(4) will still need to be assessed case by case.