Plant vs. premises: Court of Appeal decision in Urenco Chemplants Limited & Anor vs. HMRC

The debate over what constitutes plant versus premises for Capital Allowances received some clarity after a previous Court of Appeal (CoA) ruling.

The CoA was asked to consider this case in order to determine which elements of the construction of the nuclear decommissioning facility qualify for plant and machinery allowances (PMAs). The verdict was predominantly in favour of HMRC, with much of the decision by the First-tier Tribunal’s (FTT), which was overturned at the Upper Tribunal (UT), being reinstated.

Nuclear facility defined as ‘building’, not ‘plant’

The verdict meant that most of the expenditure incurred on the construction of the nuclear decommissioning facility would not qualify for plant and machinery allowances, except for the Kiln Facility and Condenser Facility and certain plinths that had been determined to have specific functions within their trade. The facilities were found to be within the definition of a ‘building’ under section 23 (s.23) of the Capital Allowances Act 2001 (CAA2001), even though they were specialist in nature and essential for key functions such as health and safety.

Clarification on the distinction between ‘expenditure on’ and ‘expenditure on the provision of’

Urenco did have a small but important win, relating to the distinction between the wording ‘expenditure on’ and ‘expenditure on the provision of’ items 1-21 of List C in s.23 CAA2001. It was held that ‘expenditure on the provision of’ any item within List C could qualify and would not be narrowed by the difference in wording. This could potentially widen the scope of claiming indirect expenditure associated with these list items.

Upholding of the s.21 restriction on buildings

Urenco’s second ground of cross-appeal, relating to Item 22 of List C (s.23 CAA2001), ‘The alteration of land for the purpose only of installing plant or machinery’, to incorporate the construction of buildings necessary to house the plant and machinery, lost. The CoA dismissed this on the basis that it would undermine the restrictions in s.21 on claiming PMAs on ‘buildings’, with the view that they were not ‘only’ for the installation of plant and machinery.

The CoA’s decision in this case adds further clarity to the plant versus premises debate, and also clarifies how the words ‘on the provision of’ are to be applied to s.23, List C.

How Leyton can help

Is your business working on a construction project? If you’re not sure which elements qualify for Capital Allowances, we can help.
Our specialist team of experts can provide advice and support to ensure you are making the most of the tax relief available.

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