Managing Director Gateley Capitus
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Pipes and valves underground

Capital allowances denied for underground gas cavities


Aubrey Calderwood reports on an upper tribunal case involving gas storage cavities which hinged on a common capital allowance issue: the distinction between what is premises and what is plant.

5th May 2021
Managing Director Gateley Capitus
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In this appeal (UT/2019/0156), the Upper Tribunal (UT) considered the original decision of the first-tier tax tribunal (FTT) where the appellants were denied capital allowances for expenditure incurred on the creation of underground caverns to store gas.

The Upper Tribunal (UT) upheld the FTT’s decision and found that the FTT had not misdirected itself on the common law meaning of plant.


The companies, Cheshire Cavity Storage 1 Limited and EDF Energy (Gas Storage Hole House) Limited, constructed and operated underground cavities which allowed them to store gas under high pressure from the National Transmission System (NTS).

The cavities enabled the companies to quickly remove gas back to the NTS to take advantage of the price volatility of gas.  

The cavities were formed by injecting water into naturally occurring salt rock beneath the ground which, when the salt rock dissolves, leaves a hole filled with saltwater (leaching). Gas is then pumped into the hole and the saltwater in it is expelled (debrining). The rock around the hole creates a barrier so the gas cannot escape. The cavity is connected by pipes to the NTS, which is owned by National Grid, and which supplies gas to end users.


At its simplest level this case is a re-run of a commonly occurring issue in capital allowances case law; namely, the distinction between what is premises and what is plant. The case carefully examined the most relevant precedent authorities at length and, even from that perspective alone, is a useful reminder of the issues in point.

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