Supreme Court decision signals need to review capital allowance claims
The Supreme Court has delivered an important ruling that will affect how many UK businesses approach capital allowance claims.
In a recent case involving offshore wind farm developments - Orsted West of Duddon Sands (UK) Limited & Ors v HMRC [2026] UKSC 12 - the Court ruled that pre‑construction surveys and technical studies were too remote to qualify for plant and machinery capital allowances. While the case focused on large energy projects, the principles apply far more widely.
The decision confirms a narrower interpretation of what counts as expenditure incurred “on the provision of” plant and machinery. In simple terms, costs that help inform design or planning - such as feasibility studies or surveys - will not qualify, even if they are essential to getting a project off the ground.
Key points for businesses
Many businesses incur upfront costs on capital projects, including design, feasibility and preparatory work. This ruling reinforces that not all necessary costs qualify for capital allowances, and that claims may need closer review.
This is particularly relevant for organisations that take a template or standardised approach to capital allowance claims - such as multi‑site retailers or large care home groups. Where claims have historically been prepared using broad assumptions across large portfolios, businesses may now need to revisit what is being claimed and why.
While the number of affected items may be limited in some cases, the judgment highlights the growing importance of a careful, evidence‑based review of qualifying expenditure, rather than relying on precedent alone.
Implications for future projects
For larger infrastructure or development projects, the decision may also influence how costs are treated going forward. Where certain costs are unlikely to qualify for capital allowances, businesses may look to avoid capitalising them where possible and review alternative treatments instead.
This brings tax, accounting policy and project planning closer together and highlights the value of early advice - before costs are incurred - so that expenditure is correctly identified and treated from the outset.
The takeaway
Overall, the ruling is a reminder that commercial necessity does not automatically mean tax relief. As scrutiny continues to increase, businesses undertaking capital projects - large or small - should ensure their capital allowance claims remain robust, well‑supported and up to date.
We’re here to help
Our specialist capital allowances team works closely with clients to review current and historic claims, assess risk exposure and ensure future investment decisions are tax‑efficient and compliant. Get in touch to discuss your position and how our team can support you.
Authored by Paul Smith and Aulfat Bi
