The latest judgement the Court of Appeal in December 2022 on what expenditure is deemed plant has set aside the Upper Tribunal’s decision that the First Tier Tribunal’s (FTT) ruling was incorrect and that the plant was ineligible and did not qualify for capital allowances. The case was originally heard in 2019.
The taxpayer, Urenco, incurred £1billion of expenditure on a nuclear deconversion facility, their trade providing enriched uranium. Most of the expenditure was agreed, however, £192million, in the Tails Management Facility (TMF) was disputed.
There have been many tax cases disputing what is plant, a building, structure, for capital allowances. Recent cases with HMRC have involved a grain silo (May & Amor v RCC) and a potato store (JTO Griffiths Ltd v HMRC) both cases the Taxpayer has been successful.
Several points have come out of this case, did the FTT take a too narrow approach to what is function and premises. That the “provision of plant and machinery” even though performing as a premise is also a function as plant. The definition of a building in its common meaning, considering the appearance, does not necessarily mean it is not functioning as plant.
The TMF facility had to meet safety regulations to provide radioactive shielding. One of the comments was that whilst safety was inherent in a building or structure, that the process could still function efficiently, in theory. However, in practice the walls and roof acted as a shield from a regulatory basis and therefore were in fact a necessity. Lastly, consideration was given to the original drafting from Schedule AA1 In 1996, which now is CAA s23 list c, items 1-4, where the drafting of the legislation was found to have an error in the Tax Law Rewrite Project. The key point expenditure “on the provision” of those items, or merely expenditure “on” them, that is not only the expenditure on the asset in question, but associated costs which of items for the item of plant claimed.
With the current super deduction for plant and machinery at 130%, this latest judgment demonstrates the complexities of determining whether an item can qualify for plant. No doubt, with the extra tax relief available for the last 2 years, HMRC will be looking even more closely at claims submitted.