Capital allowances on nuclear site: FTT erred in law

In Urenco Chemplants Limited and Urenco UK Limited v HMRC [2022] UKUT 00022, the Upper Tribunal (UT) found that the First Tier Tribunal (FTT) had erred in law when deciding that certain expenditure on a nuclear deconversion facility was not eligible for capital allowances.

• Urenco Chemplants Limited and Urenco UK Limited (together, Urenco) form part of a corporate group that provides approximately 30% of the global enriched uranium supply for the civil nuclear industry.
• Urenco incurred £1bn of expenditure on the construction of a nuclear deconversion facility in Cheshire which safely processes a radioactive and highly toxic byproduct of uranium enrichment.
• While the capital allowance treatment of most of this expenditure was not in dispute, £192m was not accepted by HMRC as qualifying for Plant and machinery capital allowances.

Urenco Appealed to the First Tier Tribunal (FTT), which chose to review assets as a single entity as they were physically connected and supported each other in each of the different structures.

The FTT then considered whether:

• Each separate facility functioned as plant.
• The expenditure was on the provision of a building or structure (which would generally not qualify for plant and machinery allowances) and if so, whether the items were on List C (s.23 CAA 2001).
  • List C contains items that are not precluded from being plant by List A (s.21: buildings) or List B (s.22: structures).
  • The inclusion of an item on List C does not automatically mean that it is plant.

The FTT concluded that:

• The kiln facility and the condenser facility functioned as plant, as did various plinths.
• The other structures were the setting in which the trade was carried on rather than the apparatus with which the trade was carried on. These were not, therefore, plant.
• In any event, all the structures were buildings. The other separately identified assets were incorporated in, or connected with, those buildings and so did not qualify for plant and machinery allowances.
• No expenditure was saved by being within List C.

Urenco Appealed the FTT's decision to the Upper Tribunal (UT) on six different grounds. The UT found that the FTT erred in law in:

• Applying the functionality test when considering if items were plant or machinery.
• Deciding whether the expenditure was ‘On the provision of’ plant or machinery in respect of the walls and slab in the vaporisation facility.
• Concluding that List A applied to prevent all of the disputed items of expenditure from being eligible for plant and machinery allowances.

The FTT did not err in law in deciding that Items 1, 4 or 22 of List C would not apply to save expenditure otherwise within List A.

As the errors of law may have resulted in the FTT making different decisions, the UT set aside the FTT’s earlier decisions where those errors had been made. The UT remitted the case back to the FTT to redecide accordingly.

Useful guides on this topic

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

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

Fixtures: Overview
What are fixtures? How do I claim lost or unclaimed fixtures? When must fixtures be pooled? 

Structures & Buildings Allowance (SBA)
Who can claim Structures and Buildings allowance? What expenditure is eligible? How to make a claim? 

Expenditure on nuclear site was on structure and not plant
In Urenco Chemplants Ltd and Urenco UK Limited v HMRC [2019] TC7318, expenditure on the cost of constructing a tails management facility at a nuclear site was found to be structural and did not qualify for plant and machinery capital allowances.

External link

Urenco Chemplants Limited and Urenco UK Limited v HMRC [2022] UKUT 00022