Cheshire Cavity – Court of Appeal of England and Wales finds that a cavity formed out of rock to store gas was not “plant”

The taxpayer, which constructed and operated gas storage facilities in the UK, was found not to be entitled to capital allowances in respect of the expenditure incurred on the introduction of water into salt bearing rock so as to dissolve the rock and create an impervious cavity, and the displacement of the resulting brine by the introduction of gas (“de-brining”) so as to permit the storage of gas in the cavity, on the basis that the cavities were not “plant” (an undefined term).

Lewison LJ noted a “fundamental preliminary hurdle” in that “even after the de-brining, the land is still land.” He further found that even if this hurdle was surmounted, it was less appropriate to describe the item as apparatus for carrying on the business rather than as the premises in or upon which the business was conducted, so that under this jurisprudential test, the cavities were not plant.

The first question as to whether the cavities were land is reminiscent of the distinction in Canada between land (Reg. 1102(2)) and a building “or other structure" (Class 1). Cf. Hampton Golf Club (golf club greens not a structure) and Mont-Sutton (downhill ski trails qualified as surface construction).

Neal Armstrong. Summary of Cheshire Cavity Storage 1 Ltd & Anor v Commissioners for Her Majesty's Revenue and Customs [2022] EWCA Civ 305 under Reg. 1102(2).