Predevelopment costs on major developments

Businesses planning major infrastructure and development projects should be aware of a new government consultation on the tax treatment of predevelopment costs.

The consultation follows the conclusion of recent litigation at the Supreme Court. The Court found that certain early-stage surveys and studies for offshore wind farms did not qualify for plant and machinery capital allowances because they were not sufficiently closely connected to the provision of the plant.

This could affect businesses incurring significant costs before construction begins and mean that some predevelopment costs are not deductible from business profits. This could include surveys, environmental assessments, feasibility work and other studies needed to decide whether and how a project should proceed. 

The consultation is particularly focused on understanding the predevelopment costs businesses incur, how well businesses understand the tax treatment following the Supreme Court judgment and whether the tax treatment of these costs affects business and investment decisions.

The government says it is not currently minded to change the tax treatment of these costs, but the consultation could lead to changes if the evidence shows that the current treatment creates significant problems for investment or the UK’s competitiveness.

Businesses with major projects should therefore consider how their early-stage costs are being treated and keep clear records of what the costs relate to. The consultation closes on 21 September 2026.