By Farhan Nagda FCCA MBA
For a commercial property investor or business fitting out premises, professional fees can arrive long before a piece of equipment is installed. It is tempting to treat the whole project invoice as part of the capital allowances claim. The Supreme Court’s 2026 decision in Orsted is a reminder that the purpose of each cost matters more than the project heading on the invoice.
Why this matters now
The case concerned surveys and studies for offshore windfarms, not a property fit-out. But the Court interpreted the general plant-and-machinery rule: expenditure must be on the provision of the plant. HMRC has since updated its manual. Early feasibility work, site selection, planning consent and information used to decide whether a project should proceed will not normally qualify as plant-and-machinery expenditure. Detailed design integral to constructing or installing an identified item of plant may be different.
That distinction matters when a company buys or refurbishes commercial premises with qualifying equipment or fixtures. An architect’s or engineer’s fee should not be claimed automatically just because the eventual fit-out includes plant. Equally, a project-wide invoice should not be dismissed without reviewing what work was actually done.
Three questions before the claim
- What was the work for? Was it testing a site or obtaining permission, or was it directly needed to provide a specific asset that was ultimately installed?
- When was the decision made? Work undertaken while several options remained open may have a different character from final engineering drawings for a selected system.
- Can the amount be evidenced? Keep the engagement letter, scope of work, deliverables, invoices and a reasoned allocation. A percentage added to all professional fees without support is vulnerable to challenge.
Consider a company planning a new commercial unit. It pays for a feasibility study comparing three sites, then commissions final installation drawings for a ventilation system at the chosen unit. The two fees may sit in the same development budget, but they do not necessarily have the same capital allowances treatment. The precise answer depends on the work performed and the asset provided.
Do not confuse this with every development cost
The Orsted ruling concerns plant-and-machinery allowances. It does not decide how all land, building or trading-stock costs are taxed. A housebuilder developing property for sale and an investor holding a commercial building may have different accounting and tax analyses. The government’s consultation on predevelopment costs closed in September 2026; it has not itself changed the law. Businesses should apply the current rules, while keeping an eye on any future response.
What Edge can review
Edge Accountants can examine the project cost schedule before the corporation tax return is finalised, separate early-stage from asset-specific work, and identify where a specialist capital allowances review or valuation is needed. The aim is a defensible claim that reflects the documents and the commercial reality—not a blanket percentage.
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General information only, not advice on a particular transaction. Sources: UK Supreme Court, Orsted judgment; HMRC Capital Allowances Manual CA20070; HM Treasury consultation.
