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SSE win hydro tax case on structures as plant

Updated: Feb 3, 2021

Overview from published tribunal decision

SSE Generation Limited (“SSE”) has successfully challenged last year’s First Tier Tribunal decision which rejected large parts of SSE’s capital allowances claim for its £300 million hydro electric power generation scheme at Glendoe, near Loch Ness in Scotland.

Words matter

The case of SSE v HMRC [2019] UKUT 0322 (TCC) hinged on the interpretation of what certain words meant in the context of the hydro scheme and specific exclusions contained in the Capital Allowances Act (“CAA”) 2001 s22.

FTT found that a drilled and blasted underground conduit, lined with shotcrete was an aqueduct (an item specifically excluded by statute) and the Upper Tribunal (“UT”) disagreed. UT also concluded for the same reasons that the “Cut and Cover” conduit built on-site with reinforced concrete was neither a tunnel nor aqueduct. They were all structures within the definition of “industrial building” and eligible as plant.

Similarly, when it came to the Uncovered rock and concrete lined channels, Headrace, Tailrace, Turbine outflow, drainage and de-watering tunnels, UT rejected FTTs conclusions and allowed SSE’s capital allowances claim in full.

Costs for altering land

A business that incurs costs for “the alteration of land for the purpose only of installing plant and machinery” may be entitled to plant and machinery allowances and this was one of the arguments used by SSE in its earlier FTT decision.

In the end because UT found that the assets in dispute were capable of qualifying as plant in their own right this provision was not needed or discussed in detail. However, so concerned were HMRC about one of FTT decisions on “capital allowances for costs of altering land” that they introduced a clarification of interpretation and inserted an additional provision in Capital Allowances Act (“CAA”) 2001 s22(4) to limit such costs for claims made after 29 October 2018.

“The Tribunal examined many different assets and multiple aspects of the capital allowances legislation but the particular concern for present purposes was in relation to the observations made about the ‘cut and cover’ conduit (paragraphs 81-85 of the decision). Although the judge concluded (correctly in our view) that the conduit was an excluded aqueduct, he considered that the excavation works necessary for putting the aqueduct in place were allowable by virtue of the exception in item 22, List C, s23 (‘the alteration of land for the purpose only of installing plant and machinery’).

The outcome in his view was that the expenditure on the concrete inserts was excluded but the excavation works were allowable.

We thought this outcome was wrong and contrary to parliamentary intent. In our view if a person constructs something like an aqueduct, which is intended to be excluded, then all of the expenditure on the provision that asset should be excluded (i.e. both the excavation costs and the concrete inserts). Although we are appealing, the law was amended to provide certainty.

The legislative amendment ensures that references to ‘plant’ in List C exclude excluded assets. The significant reference to plant in List C is in item 22 (exception for alteration of land for the purpose only of installing plant and machinery).”

This amendment stands regardless of this decision.


The decision means that SSE’s hydro claim will increase from £34 million to around £234 million in claim. When considering the application of the legislation words should take their ordinary meaning in the context of the legislation. Capital allowances claims for costs of altering land must be linked to qualifying plant or machinery.

If you would like more details or have any questions, please do not hesitate to contact us.

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