Insights

The Supreme Court in Orsted v HMRC [UKSC 12] ruled that pre-construction environmental studies do not qualify for capital allowances. The Court established a narrow "close connection" test, holding that expenditure must be directly "on" the plant rather than merely "in connection with" it. Studies providing advice on how to choose or design plant are considered too remote and fall "well outside the limiting curve" of qualifying costs.

The Upper Tribunal (UT) has now considered last year's First-tier tax (FTT) tribunal decision on the capital allowances treatment of certain costs associated with offshore windfarms and whilst it agreed with FTT on a number of issues it took a different view on the eligibility of preliminary studies and surveys, narrowing the scope for this claim and potential claims for similar expenditure on other projects. Windfarm The UT decision concerned the following issues: - Whether