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Cheshire Cavity Storage 1 Ltd and another v HMRC

In Cheshire Cavity Storage 1 Ltd and another v HMRC [2022] EWCA Civ 305 (10 March 2022) the Court of Appeal (CA) upheld the Upper Tribunal’s (UT) decision that the costs of creating underground cavities for storing gas did not qualify for capital allowances because the cavities were not plant. 

The business of the two appellant companies was the development construction and operation of gas storage facilities. They constructed underground cavities for high pressure storage of gas from the national transmission system (NTS). The cavities allowed quick removal of the gas to the NTS to enable its owners to profit from gas price volatility. They were created from salt rock deposits by pumping water into the rock to dissolve it (‘leaching’) and then exchanging the resulting saltwater with gas (‘debrining’). The companies claimed capital allowances on the expenditure incurred on leaching and debrining. 

The First-tier Tribunal (FTT) had accepted that...

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