The Court confirms that certain study and project management costs relating to offshore wind farms are partly eligible for depreciation

In Gunfleet Sands Ltd and Others v HMRC [2022] UKFTT 35 (TC), the First Level Court (FTT) held that write-offs were available in part for certain expenses incurred for studies and project management in relation to offshore wind farms, pursuant to Article 11( 4)(a), Capital Allowances Act 2001 (CAA 2002).


Gunfleet Sands Ltd, Gunfleet Sands II Ltd, Walney (UK) Offshore Windfarms Ltd and Orsted West of Duddon Sands (UK) Ltd (the Callers) are all members of the same group of companies whose parent company is Orsted A/S, a Danish incorporated and resident company. Each of the appellants owns and operates an offshore wind farm and is in the business of generating and selling electricity. The appellants collectively incurred expenditure of approximately £48 million in connection with the construction of offshore wind farms. In particular, expenses were incurred for environmental, meteo-ocean, geophysical and geotechnical impact studies, and for project management relating to the design and construction of wind farms.

Under section 11(4)(a), CAA 2002, capital cost allowances are available for expenses “for the provision of plant or machinery”.

While HMRC accepted that plant and machinery depreciation deductions were available on the manufacture and installation of the wind turbines and the power grid cables that connect them (also collectively referred to as the “generation assets”), it refused capital cost allowances on studies and project management. costs on the grounds that the expenses were too remote from the production assets, which represented the facilities, and were unrelated to their provision. The appellants appealed against HMRC’s decision.

FTT Decision

The appeals were allowed in part.

The main issue for the FTT to determine was whether the expenses at issue related to “the provision of facilities”, pursuant to Section 11(4)(a). The appellants argued that each wind farm was a unique element of the installation and that the expenses relating to the studies were reflected in the design, construction and installation of the wind farm concerned and in the design, manufacture and installation of each wind turbine and were therefore committed to the plant supply. HMRC’s position was that the appellants had failed to demonstrate, on the basis of the available evidence, that the studies had influenced the design, construction and installation and, in any event, the design expenditure was too far to qualify.

The FTT agreed with the appellants that each wind farm was a unique part of the plant. The components were oriented towards a single objective, “to produce, intensify and then route electricity to the national grid”. The FTT then considered whether the “supply of the installation” extended to the design of the installation. The FTT distinguished between “necessary design”, without which wind farms could not perform their functions and would be operationally useless, and “useless design”, without which they could continue to generate electricity. . Study expenses directly related to the necessary design were eligible for depreciation.

The FTT applied these principles to the various elements of the studies relating to each wind farm. In some cases, the FTT found that expenses were not eligible for compensation, but identified a number of items that were eligible, including detailed meteo-ocean studies and geophysical and geotechnical studies. To the extent that project management fees related to studies eligible for capital cost allowance, they were also eligible.

Costs that were not eligible for capital cost allowances could not be deducted from profit as a pre-trade revenue expense, as they were capital in nature.


A number of recent cases have examined the amount of capital cost allowance available for infrastructure projects (see, for example, Urenco Chemplants Ltd v HMRC [2022] UKUT 022 (TC)in which the Upper Tribunal considered the test “on the supply of plant or machinery”, and Inmarsat Global Ltd v HMRC [2021] UKUT 59 (TCC) (our blog on Inmarsat can be read here)) and this case illustrates the difficulties encountered in practice in determining which costs give rise to compensation. Given the magnitude of the appellants’ claims, it would not be surprising if they sought to appeal the unsuccessful portions of the FTT’s decision to the Upper Tribunal.

The decision can be viewed here.