Orsted claimed capital allowances for expenditure on environmental surveys and studies conducted when planning offshore windfarms. The Supreme Court held that such expenditure was not ‘on the provision of plant’ under section 11(4) of the Capital Allowances Act 2001, as the phrase requires a close connection between expenditure and the plant itself.
Facts
The respondents, collectively referred to as Orsted, owned and operated offshore windfarms off the coast of England. During the planning and design phase, Orsted incurred substantial expenditure on surveys and studies investigating environmental aspects including metocean conditions, geophysical and geotechnical characteristics, marine ecology, archaeology, noise assessment, and various impact assessments required for regulatory consents. Orsted claimed these costs qualified for capital allowances under section 11(4) of the Capital Allowances Act 2001 as capital expenditure ‘on the provision of plant’.
The Studies in Dispute
The disputed studies included landscape and visual assessments, benthos studies, ornithology surveys, fish and shellfish studies, marine mammal studies, archaeology surveys, noise assessments, telecoms interference studies, traffic and tourism assessments, and metocean, geophysical and geotechnical investigations.
Issues
The central issue was whether expenditure on surveys and studies conducted during the planning phase of windfarm construction constituted capital expenditure ‘on the provision of plant’ within the meaning of section 11(4)(a) of the Capital Allowances Act 2001.
Judgment
The Supreme Court unanimously allowed HMRC’s appeal, holding that the disputed expenditure did not qualify for capital allowances.
Interpretation of ‘On the Provision of Plant’
Lady Rose, delivering the judgment, held that the word ‘on’ in section 11(4)(a) indicates a narrow test requiring close connection between expenditure and the plant provided. She stated:
the ordinary meaning of the requirement that the expenditure be ‘on the provision’ of the plant connotes a close connection between the expenditure and the plant. The primary cost is the purchase price, whether that be for an off the shelf item or a commissioned bespoke item.
Lady Rose distinguished the statutory wording from looser formulations such as ‘in connection with’ or ‘relating to’, emphasising that Parliament deliberately chose different language.
Analysis of Barclay, Curle
The Court analysed the leading authority of IRC v Barclay, Curle & Co Ltd [1969], where excavation costs for a dry dock qualified because the excavated basin was itself an integral part of the plant. Lady Rose rejected the argument that this case established a broader ‘necessity’ test:
The excavation works were expenditure on the provision of the plant because the plant included the lined basin and the lined basin was part of the overall dry dock.
Application of Ben-Odeco
The Court applied the principle from Ben-Odeco Ltd v Powlson [1978] that the ‘limiting curve’ is drawn around the plant itself. Lord Wilberforce’s formulation that the UK statutory words ‘confine the limiting curve to the plant itself’ was endorsed as supporting the narrow interpretation.
Rejection of the Court of Appeal’s Approach
Lady Rose disagreed with the Court of Appeal’s conclusion that expenditure informing design of plant qualified:
It is not helpful, therefore, to say that any study or survey that ‘informs’ or ‘feeds into’ the design of the plant must be regarded as being spent ‘on the provision of’ the plant. This is much too broad.
Implications
This decision significantly narrows the scope of qualifying expenditure for plant and machinery capital allowances. Expenditure on preliminary surveys, environmental assessments and planning studies will not qualify merely because they inform or contribute to the ultimate design of plant. The ruling has particular significance for large infrastructure projects requiring extensive preparatory work, clarifying that such costs fall outside the capital allowances regime unless they form part of the actual fabrication or installation process. The decision reinforces that capital allowances reflect depreciation of physical assets rather than all costs associated with bringing a project to fruition.
Verdict: Appeal allowed. The expenditure on surveys and studies did not qualify as capital expenditure ‘on the provision of plant’ under section 11(4) of the Capital Allowances Act 2001.
Full citation: Orsted West of Duddon Sands (UK) Limited (now named Orsted Schroders Greencoat WODS Holdco Limited) and others (Respondents) v Commissioners for His Majesty’s Revenue and Customs (Appellant) [2026] UKSC 12
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To cite this resource, please use the following reference:
National Case Law Archive, 'Orsted West of Duddon Sands (UK) Ltd v Commissioners for His Majesty’s Revenue and Customs [2026] UKSC 12' (LawCases.net, April 2026) <https://www.lawcases.net/cases/orsted-west-of-duddon-sands-uk-ltd-v-commissioners-for-his-majestys-revenue-and-customs-2026-uksc-12/> accessed 21 April 2026
