Revenue and Customs v SSE Generation Ltd [2023] UKSC 17

SSE Generation Ltd sought capital allowances for expenditure on water conduits at a hydro-electric scheme. HMRC argued these were 'tunnels' or 'aqueducts' excluded under the Capital Allowances Act 2001. The Supreme Court held that in context, 'tunnel' means a subterranean passage for transportation ways, and 'aqueduct' means a bridge-like structure for carrying water, so the disputed items qualified for allowances.

Facts

SSE Generation Ltd constructed the Glendoe Scheme, a hydro-electric power station in Scotland. The scheme included various underground conduits for collecting and transmitting water. SSE claimed capital allowances on approximately £200 million of expenditure on these items. HMRC refused the claim, arguing the items were ‘tunnels’ or ‘aqueducts’ under section 22 List B Item 1 of the Capital Allowances Act 2001 (CAA), which excludes such structures from plant and machinery allowances.

Issues

The central issue was whether the disputed water conduits constituted a ‘tunnel’ or ‘aqueduct’ within the meaning of section 22 List B Item 1 of the CAA. If so, the expenditure would not qualify for capital allowances.

Judgment

Meaning of ‘Tunnel’

Lord Hamblen, delivering the unanimous judgment, held that the meaning of statutory words depends on their context. The Court identified a thematic connection among items in List B Item 1 relating to transportation infrastructure.

Words and phrases in a statute derive their meaning from their context.

The Court concluded that ‘tunnel’ in this context means a subterranean passage for a transportation way to pass through, not merely any underground passage for conveying substances.

Meaning of ‘Aqueduct’

The Court found that ‘aqueduct’ has multiple ordinary meanings. In context, listed immediately after ‘bridge, viaduct’, it connotes a bridge-like structure for carrying water. Lord Hamblen stated:

In that context I consider that it connotes a bridge-like structure for carrying water (such as where a canal is carried over a river or valley).

The Court rejected HMRC’s argument that ‘aqueduct’ simply means any water conduit, noting this would be inconsistent with its placement in Item 1 and would render other provisions redundant.

Implications

The decision confirms that statutory interpretation must consider the grouping and thematic context of terms in legislative lists. The transportation theme of List B Item 1 limits the scope of ‘tunnel’ and ‘aqueduct’ to structures related to transportation routes. Protected undertakings like energy companies may therefore claim capital allowances on infrastructure that might otherwise appear excluded by broad readings of statutory terms. The case reinforces contextual interpretation over expansive literal approaches in tax legislation.

Verdict: Appeal dismissed. The Supreme Court upheld the Court of Appeal’s decision that the disputed water conduits at the Glendoe hydro-electric scheme were not ‘tunnels’ or ‘aqueducts’ within section 22 List B Item 1 of the Capital Allowances Act 2001, and therefore the expenditure qualified for capital allowances.

Source: Revenue and Customs v SSE Generation Ltd [2023] UKSC 17