17 April 2026
Supreme Court allows HMRC’s appeal on capital allowances relating to technical study expenditure
The Supreme Court (SC) has unanimously allowed HMRC’s appeal in the capital allowances case Orsted West of Duddon Sands (UK) Limited (now named Orsted Schroders Greencoat WODS Holdco Limited) and others v HMRC. The taxpayers own and operate offshore windfarms, and the key issue in the case concerned whether expenditure on various studies, including surveys, conducted before the windfarms became operational, constituted qualifying expenditure “on the provision” of plant and machinery for the purposes of section 11 Capital Allowances Act 2001.
The First-tier Tribunal initially allowed some of the disputed expenditure as qualifying for capital allowances, but the Upper Tribunal overturned this decision in 2023, finding that none of the expenditure was qualifying. The Court of Appeal (CA) disagreed with the stricter interpretation adopted by the Upper Tribunal and found that the taxpayers’ expenditure on studies informing the design or installation of plant qualified for capital allowances, even if not directly involved in the physical construction.
The SC has now overturned the CA’s decision, holding that the ordinary meaning of the requirement that the expenditure must be “on” the provision of plant indicates a narrow test, requiring a close connection between the expenditure and the plant provided. This narrower reading was supported by the House of Lords’ decision in Ben-Odeco Ltd. The SC did not reach a view on the exact boundary between costs that are incurred “on” the provision of plant, and those that do not meet the definition, however it held that the taxpayers’ costs of carrying out the studies and surveys did not fall close to that boundary. (Contact: Matt Smith, Steve Perry, Clare Donaldson or your usual capital allowances contact)
HMRC publish updated guidance on submitting corporate interest restriction returns
On 14 April 2026, HMRC updated two guidance pages related to submitting a corporate interest restriction return: Restriction on Corporation Tax relief for interest deductions and Submit a Corporate Interest Restriction return. The updates relate to certain administrative simplifications to the corporate interest restriction rules, introduced in Finance Act 2026, that limit the circumstances in which a reporting company is required to submit a return. The updates set out the position for periods of account ending on or after 31 March 2026.
HMRC publish MLI synthesised texts of UK tax treaties with Armenia and Senegal
HMRC have published new ‘synthesised texts’ showing how the operation of the 2011 Armenia-UK Double Taxation Convention and the 2015 UK-Senegal Double Taxation Convention are modified by the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (the ‘MLI’).
According to HMRC, unless otherwise stated, the provisions of the MLI have effect with respect to the UK-Armenia treaty in the UK and Armenia, for taxes withheld at source, from 1 January 2024; in the UK, from 1 April 2025 for corporation tax and from 6 April 2025 for income tax and capital gains tax; and in Armenia, with respect to other taxes, for taxable periods beginning on or after 1 July 2024. The provisions of the MLI have effect with respect to the UK-Senegal treaty, unless otherwise stated, for taxes withheld at source, from 1 January 2023; in the UK, from 1 April 2023 for corporation tax and from 6 April 2023 for income tax and capital gains tax; and in Senegal, with respect to other taxes, for taxable periods beginning on or after 1 January 2024.
Innovative Bites Limited: Are Mega Marshmallows normally eaten with the fingers?
This dispute concerns whether Innovative Bites Limited’s Mega Marshmallows product (the Product) was “confectionery”, in which case the VAT zero rate applicable to food would not apply. Note 5 of Group 1, Schedule 8, VATA 1994 includes in the definition of “confectionery”, “any item of sweetened prepared food which is normally eaten with the fingers”. The First-tier Tribunal (FTT) and Upper Tribunal (UT) found that, considering the viewpoint of a typical customer and giving “confectionery” its ordinary meaning, the Product was not “confectionery”. The UT considered Note 5 “akin to a rebuttable presumption”, and an inclusive definition to clarify potential doubt, and that a multi-factorial assessment may still be necessary. The Court of Appeal (CA) then ruled that the UT had erred in its interpretation of Note 5. The CA considered that Note 5 is conclusive, and absent absurdity, products described therein, including “sweetened prepared food which is normally eaten with the fingers”, are “confectionery”. The CA held that the FTT had failed to address whether the Product was “sweetened prepared food which is normally eaten with the fingers” and remitted that question to a differently constituted FTT.
The parties agreed that the Product was “sweetened prepared food”, so the narrow issue for the FTT was whether the Product was “normally eaten with the fingers”. The FTT considered that “normally” requires that the Product is more often eaten with the fingers than not, that is, over 50% of the time. The FTT found that, in aggregate, the Product was “more frequently eaten by one of the non-finger ways than by one of the with-the-fingers ways” and therefore was not normally eaten with the fingers. As the original FTT had found that the Product was not “confectionary” in the ordinary sense, it did not fall within Note 5. The FTT allowed Innovative Bites’ appeal. (Contact: Andrew Roberts)
EMEA Dbriefs webcasts
The next EMEA Dbriefs webcast will take place on Wednesday 22 April 2026 at 12.00 BST/13.00 CEST. In UK tax update - April, our panel will discuss topical tax developments of relevance to UK businesses in relation to corporate taxes, employment taxes and indirect taxes.