In light of the recent Supreme Court decision in Gunfleet Sands case, which emphasised a more restrictive approach to what expenditure qualifies “on the provision of plant,” it is useful to revisit SSE Generation Ltd v HMRC.
While the two cases address different aspects of the capital allowances regime, SSE provides an important reminder that the classification of assets as plant remains a distinct and highly fact-sensitive exercise, and one where the courts may take a more purposive approach.
By way of background, the case related to SSE’s hydroelectric scheme at Glendoe in Scotland. Around £200 millions of expenditure was incurred on the water infrastructure feeding the plant, including conduits, headrace and tailrace systems, and various underground tunnels and channels.
The dispute centred on a single question: whether the assets were simply “structures” (tunnels and aqueducts) falling within List B, or whether their functional role meant they could qualify as plant. HMRC’s position was that they were structures, meaning no plant allowances at all, whereas SSE argued that they were fundamental to how the plant operates and should qualify.
The Supreme Court agreed with SSE on the majority of the assets. HMRC sought to deny allowances on c.£200 million of expenditure, however the Court concluded that a substantial proportion of this spend was not caught by the List B exclusions and remained eligible, subject to a detailed, asset-by-asset classification.
The key point is how the Court interpreted “tunnel” and “aqueduct.” Rather than applying a wide, literal definition, it considered how those terms sit within the legislation and identified a clear transportation infrastructure theme within List B Item 1.
So, in practice:
• A “tunnel” is not just any underground structure, it is a passage for transport
• An “aqueduct” is not any water conduit, it is a bridge-like structure carrying water
On that basis, these assets were not the type of structures Parliament intended to exclude and so were not caught by List B.
From a practical perspective, this is an important reminder that classification drives the outcome. Just because something looks like a tunnel or carries water does not mean it is caught by List B. The analysis needs to focus on what the asset is in context, rather than how it might be described in isolation.
It also reinforces that the legislation should not be applied as a blunt instrument. Where terms have multiple meanings, the courts will look to context and purpose, rather than defaulting to the widest interpretation.
That said, the decision does not mean everything of this nature will qualify. Some elements of large infrastructure projects will still fall within List B or other exclusions, and the boundary is not always clear. The key takeaway is that claims need to be supported by a granular, asset-level analysis, with a clear rationale for why assets fall on the plant side of the line.
Overall, this is a strong taxpayer result. HMRC sought to exclude a significant block of expenditure in full, and the Court pushed back on that approach, confirming that the detail of how assets are characterised can materially change the outcome of a claim.
