Court of Appeal confirms pre-construction development costs can qualify for Capital Allowances

A recent Court of Appeal decision in Orsted West of Duddon Sands (UK) Ltd and others v HMRC [2025] EWCA Civ 279 provided clarity on the Capital Allowances treatment of pre-construction development costs, such as environmental assessments and engineering studies involved in developing offshore windfarms.

The appellant companies were members of the same corporate group headed by Orsted. The Court of Appeal ruled that a majority of the appellants’ pre-construction development costs (totalling around £48m) did qualify under the Capital Allowances Act 2001, which includes expenditure ‘on the provision of plant and machinery’. The qualifying expenditure includes the costs of design, installation, as well as costs for studies in relation to the development, provided that:

The plant or machinery to which the expenditure relates was actually acquired or constructed.
The expenditure did not arise from characteristics or circumstances particular to the specific taxpayer.

The Court held that expenditure carried out as part of environmental impact, technical/engineering studies (e.g. on wind, ocean and seabed conditions), and the cost of project management when setting up the windfarms was qualifying expenditure for the purposes of claiming Capital Allowances.

The decision provides welcome clarification and confirmation of the law regarding what pre-construction costs can qualify for tax relief.

How Leyton can help

While the rules around eligible expenditure for Capital Allowances may seem daunting, our specialist team of experts can provide advice and support to ensure you’re making the most of the tax relief available.

We’re here to help you save time and effort while maximising your claim. Our deep understanding of both Court of Appeal case law and HMRC rules will give you peace of mind that every asset eligible for tax relief has been identified – even for the most complex of construction projects. We’ll do all the hard work, liaising with your team to create a robust and compliant claim while giving clear guidance on the most tax-efficient approach.

If you have a project you’d like to discuss, please feel free to get in touch with our team to find out how we can help you to maximise your savings.

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