In Orsted West of Duddon Sands (UK) Limited & Ors v HMRC, the Supreme Court considered whether major pre‑construction costs could qualify for tax relief as capital allowances. The case arose from offshore wind projects where the companies spent significant amounts on environmental surveys, seabed studies and technical investigations before any turbines were built. The companies argued that these costs were an essential part of creating bespoke assets and should therefore attract tax relief. HMRC disagreed, and the Supreme Court ultimately sided with HMRC.

The Court’s decision turned on a single statutory phrase: capital allowances are only available for expenditure incurred “on the provision of plant or machinery.” The judges held that this wording requires a close and direct link to the physical asset itself. While the surveys were necessary to decide whether and how to build the windfarms, they were seen as preparatory. They put Orsted in a position to construct plant, but they were not part of providing the plant itself.

Although this case involved offshore windfarms, the lesson is far broader. Many businesses incur substantial costs before buying or building long‑term assets: feasibility studies, design work, professional fees or regulatory assessments. After this decision, those costs are less likely to qualify for capital allowances unless they are tightly bound to the actual acquisition or installation of the asset.

When planning major investments, don’t assume all upfront project costs will attract tax relief. Map costs carefully as they arise and separate genuinely asset‑related spending from earlier feasibility or exploratory work. Getting that distinction right early can avoid unpleasant tax surprises later.