Revenue and Customs v SSE Generation Ltd

Factual and Procedural Background

The Respondent constructed and operates a modern hydro-electric scheme at The Site in The Region. The facility, largely built underground to maximise water pressure and minimise environmental impact, includes numerous conduits, tunnels and channels used to collect, pressurise and discharge water. The construction cost of the disputed items was approximately £200 million.

For corporation tax purposes, the Respondent claimed capital allowances on those items. The Appellant disallowed the claim on the basis that the items were “tunnels” or “aqueducts” within List B, Item 1 of the Capital Allowances Act 2001 (“the CAA”), thereby excluding the expenditure from relief.

The Respondent appealed:

• First-tier Tribunal (“FTT”): held most items were not “tunnels” but some were “aqueducts”.
• Upper Tribunal (“UT”): agreed none were “tunnels” and held none were “aqueducts”.
• Court of Appeal: upheld the UT on “aqueduct”, but confirmed the narrower, transportation-focused meaning of “tunnel”.
• Supreme Court: the present judgment delivered by Judge Hamblen (with Judges Reed, Briggs, Leggatt and Stephens agreeing).

Legal Issues Presented

1. Whether the conduits and passages forming part of the hydro-electric scheme are a “tunnel” within List B, Item 1 of Chapter 3, Part 2 CAA.
2. Whether those same items are an “aqueduct” within List B, Item 1 CAA.
3. If either term applies, whether expenditure on the disputed items is thereby excluded from plant and machinery allowances.

Arguments of the Parties

Appellant's Arguments

• The ordinary meaning of “tunnel” is any subterranean passage, regardless of its function. The grouping in List B does not justify narrowing that meaning.
• “Aqueduct” naturally includes any conduit that conveys water; Parliament’s use of the term without qualification indicates an intent to exclude all such structures from allowances.
• An unrestricted reading best serves the legislative purpose of drawing a clear line excluding structures, whereas the Court of Appeal’s thematic approach improperly narrows the exclusion.
• The appearance of “tunnel” in both Lists B and C shows Parliament knew how to qualify the term when it wished; the absence of qualification in List B proves a broad meaning was intended.

Respondent's Arguments

• Both “tunnel” and “aqueduct” have more than one ordinary meaning; context must decide which applies.
• The items listed in List B, Item 1 share a transportation theme. Consequently, “tunnel” should mean a subterranean passage forming part of a transportation route (road, railway, canal), not a water conduit.
• “Aqueduct”, placed after “bridge” and “viaduct”, refers to a bridge-like structure carrying water, not a buried pipe or channel.
• A contextual, thematic construction respects Parliament’s structured grouping and avoids unnecessary duplication with other List B items (e.g., canals, drainage ditches).

Table of Precedents Cited

Court's Reasoning and Analysis

The Court began by acknowledging that both “tunnel” and “aqueduct” have multiple ordinary meanings. Where more than one ordinary meaning exists, context determines Parliament’s intended sense.

Examining List B, Item 1, the Court identified a unifying theme: structures integral to transportation routes or “ways”. It reasoned:

• “Tunnel” therefore means a subterranean passage created to allow a roadway, railway or canal to pass through an obstacle. A mere water-carrying conduit does not fit that description.
• “Aqueduct” appears immediately after “bridge” and “viaduct”, signalling a bridge-like structure. In this context, the term denotes a structure that carries water—potentially including, but not limited to, canal-bearing bridges—across a gap.

The Court rejected the Appellant’s argument that thematic interpretation impermissibly narrows Parliament’s language, observing that Parliament itself grouped the items thematically, and those groupings are a legitimate contextual aid. It further held that adopting the transportation theme avoided redundancy with other List B items (e.g., “canal”, “drainage ditch”) and preserved coherence between Lists B and C.

Applying these definitions, none of the Respondent’s conduits—constructed solely for the movement of water within the hydro-electric scheme—constituted a “tunnel” or an “aqueduct” within List B, Item 1. Consequently, the expenditure on those items was not disqualified by section 22 CAA.

Holding and Implications

Appeal DISMISSED.

The Supreme Court affirmed the Court of Appeal’s contextual, transportation-focused interpretation of “tunnel” and adopted a bridge-like meaning of “aqueduct”, concluding that the disputed hydro-electric conduits fall outside List B, Item 1. The Respondent is therefore entitled to claim capital allowances on approximately £200 million of expenditure. The decision clarifies how thematic context within grouped statutory lists influences the meaning of individual terms, but it sets no broader rule beyond statutory construction principles.