Structures as plant: SSE Generation Ltd

Since the Annual Investment Allowance (“AIA”) limit was increased to £1,000,000 (until 31 December 2020 – we have more details here), the status of items as “plant and machinery” has taken on an enhanced relevance for many small to medium businesses; for most such businesses, capital expenditure on such items can be fully written-off against tax in the year of acquisition.  (It’s worth noting, by the way, that one of the few circumstances in which AIA is not available is—inexplicably—where the business is carried on by a partnership or LLP which has one or more corporate members.)

SSE Generation Ltd could scarcely be described as a small to medium business and we doubt if AIA figures anywhere in its tax planning: but its recent appearance before the Upper Tribunal in [2019] UKUT 0332 (TC) in a case involving capital allowances on the £260m cost of a hydroelectric scheme does bring out one or two points which may conceivably be of wider interest.

Although a building can almost never be “plant” qualifying for Plant and Machinery Allowances (“PMAs”), certain structures can be.  First, some structures have previously been held by the courts to be “plant”: that covers a whole alphabet of items from advertising hoardings to zoo cages.

Other than that, a structure will qualify as “plant” only if (a) it does not fall within a list of “excluded structures” and (b) it meets one of three tests.  The three possibilities are that the structure:

  • Meets the definition of an “industrial structure” as it applied for the purposes of the former Industrial Buildings Allowance; or
  • Is in use for the purposes of an undertaking for the extraction, production, processing or distribution of gas; or
  • Is in use for the purposes of a trade of providing telecommunication, television or radio services.

In the case of SSE Generation, this meant that allowances were available in connection with the hydroelectric scheme for concrete-lined water conduits (some underground and some open), as well as the headrace and tailrace.  It’s difficult to give specific examples as to what other structures might qualify in other industries: enough for the moment to note that the case reminds us that there are possibilities within these byzantine rules.

The second point of interest is in regard to “installation” of plant.  PMAs are due in respect of the cost of “the alteration of land for the purpose only of installing plant or machinery”.  In the SSE Generation case, the First-tier Tribunal had considered this to “include installation by the creation in situ of the asset in question, in addition to installation by putting in place something which previously existed”.

The Upper Tribunal disagreed, considering that relief under this head is “confined to items which need to be installed separately from the process of manufacture or construction” and applies “where ‘installation’ occurs in circumstances where it is necessary to make alterations of the land only to enable ‘installation’ of the plant to take place, not in circumstances where the alteration is made in order to build or construct the asset in question.”

Whether your capital expenditure on plant is £260m or something more modest, please get in touch with your usual BKL contact for more information or use our enquiry form.



Sam Inkersole

In 2022, Sam won the Taxation’s Rising Star award at the Taxation Awards in and was named in the Accountancy Age 35 Under 35.

Jon Wedge

While Jon’s client work focuses on the financial services sector, he also oversees the firm’s assurance service, as well as supporting the trainees following in his footsteps.


Elana joined us in 2017 as an ACA trainee, after graduating from Durham University where she had studied languages. She is now a manager in our assurance team.


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