An EU advisory commission has resolved a long-running Denmark-UK tax dispute involving Ørsted’s Walney Extension and Hornsea 1 offshore wind farms, determining that the projects are primarily taxable in the UK throughout their operating lifespans.
An advisory commission under the EU Arbitration Convention has issued its final opinion on a long-running tax dispute between Denmark and the UK over two Ørsted offshore wind farms. The Danish Tax Agency and UK Revenue and Customs notified Ørsted of the decision on 11 September
The commission determined that Walney Extension and Hornsea 1 have genuine legal and economic purposes. Both farms are primarily taxable in the UK, where they are physically located, throughout their operating lifespans. This designation prevents either country from claiming taxation rights simultaneously on the same income streams.
Eight-year path to resolution
Ørsted first requested tax clarification from both countries in 2015, seeking to prevent double taxation on the projects. The company worried that conflicting interpretations of international tax law could expose it to charges from both jurisdictions. After the Danish Tax Agency and HMRC could not reach agreement, the case moved to the advisory commission in 2023.
The final opinion aligns with the tax principles Ørsted has applied to the offshore wind sector. The company stated satisfaction with the outcome, viewing it as consistent with established international tax regulations for renewable energy projects.
Financial impact and next steps
The ruling requires a minor upward adjustment to Ørsted’s Danish tax position, plus related interest charges. This adjustment fits within Ørsted’s existing provisions for uncertain tax positions. Over time, UK tax reductions will largely offset the Danish charge, resulting in minimal net impact.
Ørsted plans to open talks with both tax authorities. The company expects the same legal principles from this opinion to apply to other projects where the Danish Tax Agency has issued similar administrative decisions or draft assessments. HMRC is also expected to align its treatment with the Commission’s reasoning.
