Not plant: underground gas storage cavities

In Cheshire Cavity Storage 1 Ltd & Anor v HMRC [2021] UT 0156, the Upper Tribunal (UT) dismissed the appellants appeal against the FTT decision denying a capital allowances claim on the creation of underground storage cavities for the storage of gas.

This case was an appeal by the appellants against the FTT decision in Cheshire Cavity Storage 1 Limited and Anor v HMRC [2019] TC07301 which dismissed the claim for capital allowances on underground storage cavities. It found:

• The cavities were not plant. A plant-like function does not necessarily make premises plant, in circumstances where the premises also function as premises.
• The cavities did have a plant-like function but that was an incident of the construction and not the reason they were constructed in the manner they were and there was no evidence that their functioning in a plant-like manner was essential.
• The appellants business was the short-term storage of gas so the premises-like function of shelter and containment was the significant and predominant function of the cavities.
• Even if they were plant, they were excluded from allowances by s.22 CAA and were also not saved by List C.
  • The FTT said that list B and C were not intended by Parliament to be a test of function; they were intended as qualifications on what case law had found to be plant which was a functional test. The lists were definitive and could not be applied by analogy e.g. it could not be said that the cavities were within list C because they were like storage tanks. For the list to apply they must be storage tanks.
  • The exemption at List B for structures ‘in use for the purposes of an undertaking for the extraction, production, processing or distribution of gas’ did not apply as the cavities were being used to store gas.
  • The cavities were not storage equipment, cold rooms, silos or storage tanks (all items on list C) nor were they created for the installation of plant and equipment.

The UT dismissed the appeal on the grounds that:

• The FTT had adopted the correct approach and applied that approach consistently to the facts of the case.
• While the FTT may have considered the wrong argument, that did not lead to an error in law given the context of the case.

Useful guides on this topic

What expenditure qualifies for plant & machinery allowances?
What expenditure qualifies as plant and machinery? What is treated as part of a building? What is excluded?

Plant & machinery: Allowances
What capital allowances are available on plant and machinery? How do you calculate them? What are qualifying activities?

No capital allowances for underground gas storage cavities
In Cheshire Cavity Storage 1 Limited -and- EDF Energy (Gas Storage Hole House) Limited v HMRC [2019] TC07301 the FTT dismissed claims to capital allowances on underground gas storage cavities. They were not plant and machinery.

External links

Cheshire Cavity Storage 1 Ltd & Anor v HMRC [2021] UT 0156