Hydro power plant

Why Did Six Forward Get Involved?

The client is a limited company that constructed a Water Hydro Power plant in Scotland. The run-of-river hydro power scheme uses water which is collected by an intake weir before being conveyed by a buried pressure-pipeline to a new powerhouse building constructed at the foot of the waterfall. After passing through the turbine, the water then returns to a burn via an open channel tailrace. There had been a high-profile case (SSE Generation v HMRC) where HMRC did not accept that certain assets qualified as plant and machinery within the hydroelectric plant and thus denied capital allowances. The profile of the case cast doubt in the mind of the accountants and their client as to the extent of allowances to be claimed.

How Did We Help?

SSE spent £300m and made a plant and machinery claim for £260m of the spend. HMRC argued against this claim and accepted only £34m of the expenditure as valid. The case went to the First-tier Tribunal, the Upper Tribunal and then the Court of Appeal. The client and the accountant wanted to ensure that a capital allowances claim was valid, under the circumstances, and wanted help in claiming capital allowances so that they could maximise their claim. Therefore, they sought the advice of capital allowances specialists.

By undertaking due diligence, fully understanding the legislation, and navigating the complexities of case law we were able to provide certainty to the accountant and client and reduce any perceived risk of making the fullest capital allowances claim.

What Was the Outcome?

The outcome was that 77% of the project expenditure qualified for allowances.

Relevant Legislation For This Case

Capital Allowances Act 2001, s. 11, 15, 33A, 176
Case Law (SSE v HMRC) FTT, UT, Court of Appeal

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