Capital Allowances and Wind Farms: A Win for Developers – and a Warning for QS’s
Intro
A recent Court of Appeal decision involving Ørsted’s offshore windfarms has delivered clarity – and a financial boost – to developers and clients alike. For quantity surveyors and cost consultants, the implications are far-reaching. The case reinforces just how critical it is to correctly categorise and evidence preconstruction costs when it comes to claiming tax relief.
What Happened in the Case
Ørsted, the Danish parent of several UK wind farm companies, challenged HMRC’s decision to deny £48 million in capital allowances for studies and surveys conducted before construction began on major offshore wind projects like Gunfleet and Walney. HMRC argued these environmental, technical, and planning studies were too remote from the installation of turbines to qualify for tax relief.
The Court of Appeal disagreed. It found that many of these predevelopment costs directly supported the design and installation of the windfarms and therefore did qualify as expenditure “on the provision of plant and machinery” under CAA 2001, s.11. The court also pushed back against an overly narrow interpretation that could have harmed UK infrastructure investment.
Why This Matters in Real-World Practice
From a QS perspective, this case shines a spotlight on how early-stage costs – including professional fees, surveys, impact assessments, and feasibility work – are treated for tax purposes. These items may often be bundled under preliminaries or soft costs, but their classification and linkage to capital assets now carries serious financial weight.
For developers, the decision provides a green light to confidently include essential design and survey costs within their capital allowance claims – particularly on major infrastructure or energy projects. This can materially improve cashflow and project viability.
Impacts for Everyday Quantity Surveying
Capital allowances must be considered at feasibility stage. A QS involved in early project costing should flag which costs may qualify and ensure proper coding or documentation from the outset.
Tax treatment affects value-for-money reviews. Misclassifying capital-eligible costs as revenue can reduce potential tax relief and distort affordability models.
QSs are key in preparing evidence. Courts looked closely at how studies informed design or installation. A QS can play a pivotal role in demonstrating this linkage clearly in reports or claims.
How to Avoid Problems Going Forward
Map costs to asset function. Ensure studies or fees are clearly tied to the design, siting, or installation of physical infrastructure, not just general planning or compliance.
Collaborate with tax and legal teams early. Don’t wait for post-construction disputes – align with accountants or tax advisors during procurement and budgeting.
Maintain detailed records. Especially for site investigations, design iterations, or feasibility studies. These could determine whether tens of thousands in allowances are claimed or lost.
Understand s.11 CAA 2001. As QSs expand their client-side advisory role, having a working grasp of capital allowance rules is increasingly valuable.
Final Thought:
This ruling gives much-needed clarity – and opportunity – for developers and consultants. As a QS, recognising the hidden value in early-stage costs could become one of your most strategic contributions to a project’s financial success. Check out our Capital Allowances Checklist.
