House of Commons Amendments

Session 2014 - 15
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Other Bills before Parliament

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(a)
for a company that claims relief to be treated as carrying

on a separate trade relating to the theatrical production

(see section 1217H(3)), and

(b)
about the calculation of the profits and losses of that trade

(see sections 1217I to 1217IF).

(6)
Sections 1217K to 1217KC—

(a)
provide for relief by way of payments (called “theatre tax

credits”) to be made on the company’s surrender of

certain losses of that trade, and

(b)
set out an upper limit on relief, in connection with State

aid legislation.

(7)
Sections 1217LA and 1217LB are about certain cases involving

tax avoidance arrangements or arrangements entered into

otherwise than for genuine commercial reasons.

(8)
Sections 1217M to 1217MC contain provision about the use of

losses of the separate trade (including provision about relief for

terminal losses).

(9)
Sections 1217N and 1217NA are concerned with the provisional

nature of relief given for periods preceding the period in which

the company ceases to carry on the separate theatrical trade.

1217FA
“Theatrical production”

(1)
In this Part “theatrical production” means a dramatic production

or a ballet (and any ballet is therefore a theatrical production,

whether or not it is also a dramatic production).


But see section 1217FB.

(2)
“Dramatic production” means a production of a play, opera,

musical, or other dramatic piece (whether or not involving

improvisation) in relation to which the following conditions are

met—

(a)
the actors, singers, dancers or other performers are to

give their performances wholly or mainly through the

playing of roles,

(b)
each performance in the proposed run of performances is

to be live, and

(c)
the presentation of live performances is the main object,

or one of the main objects, of the company’s activities in

relation to the production.

(3)
“Dramatic piece” may also include, for example, a show that is to

be performed by a circus.

(4)
For the purposes of this section a performance is “live” if it is to

an audience before whom the performers are actually present.

1217FB
Productions not regarded as theatrical

(1)
A dramatic production or ballet is not regarded as a theatrical

production if—

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(a)
the main purpose, or one of the main purposes, for which

it is made is to advertise or promote any goods or

services,

(b)
the performances are to consist of or include a

competition or contest,

(c)
a wild animal is to be used in any performance,

(d)
the production is of a sexual nature (see subsection (3)), or

(e)
the making of a relevant recording is the main object, or

one of the main objects, of the company’s activities in

relation to the production.

(2)
For the purposes of subsection (1)(c) an animal is used in a

performance if the animal performs, or is shown, in the course of

the performance.

(3)
A production is of a sexual nature for the purposes of subsection

(1)(d) if the performances are to include any content the nature of

which is such that, ignoring financial gain, it would be

reasonable to assume the content to be included solely or

principally for the purpose of sexually stimulating any member

of the audience (whether by verbal or other means).

(4)
“Relevant recording” means a recording of a performance—

(a)
as a film (or part of a film) for exhibition to the paying

general public at the commercial cinema, or

(b)
for broadcast to the general public.

(5)
In this section—

“broadcast” means broadcast by any means (including

television, radio or the internet);

“film” has the same meaning as in Part 15 (see section 1181);

“wild animal” means an animal of a kind which is not

commonly domesticated in the British Islands (and in this

definition “animal” has the meaning given by section 1(1)

of the Animal Welfare Act 2006).

1217FC
“Production company”

(1)
A company is the production company in relation to a theatrical

production if the company (acting otherwise than in

partnership)—

(a)
is responsible for producing, running and closing the

theatrical production,

(b)
is actively engaged in decision-making during the

production, running and closing phases,

(c)
makes an effective creative, technical and artistic

contribution to the production, and

(d)
directly negotiates for, contracts for and pays for rights,

goods and services in relation to the production.

(2)
No more than one company can be the production company in

relation to a theatrical production.

(3)
If more than one company meets the conditions in subsection (1)

in relation to a theatrical production, the company that is most

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directly engaged in the activities mentioned in subsection (1) is

the production company.

(4)
If there is no company meeting the conditions in subsection (1),

there is no production company in relation to the production.

Companies qualifying for relief

1217G
How a company qualifies for relief

(1)
A company qualifies for relief in relation to a theatrical

production if—

(a)
it is the production company in relation to the

production, and

(b)
the commercial purpose condition (see section 1217GA)

and the EEA expenditure condition (see section 1217GB)

are met.

(2)
There is further provision relating to subsection (1) in section

1217LA (tax avoidance arrangements).

1217GA
The commercial purpose condition

(1)
The “commercial purpose condition” is that at the beginning of

the production phase the company intends that all, or a high

proportion of, the live performances that it proposes to run will

be—

(a)
to paying members of the general public, or

(b)
provided for educational purposes.

(2)
The reference in subsection (1) to “live performances” is to be

read in accordance with section 1217FA(4).

(3)
A performance is not regarded as provided for educational

purposes if the production company is, or is associated with, a

person who—

(a)
has responsibility for the beneficiaries, or

(b)
is otherwise connected with the beneficiaries (for

instance, by being their employer).

(4)
For the purposes of subsection (3), a production company is

associated with a person (“P”) if—

(a)
P controls the production company, or

(b)
P is a company which is controlled by the production

company or by a person who also controls the production

company.

(5)
In this section—

“the beneficiaries” means persons for whose benefit the

performance will or may be provided;

“control” has the same meaning as in Part 10 of CTA 2010

(see section 450 of that Act).

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1217GB
The EEA expenditure condition

(1)
The “EEA expenditure condition” is that at least 25% of the core

expenditure on the theatrical production incurred by the

company is EEA expenditure.

(2)
In this Part “EEA expenditure” means expenditure on goods or

services that are provided from within the European Economic

Area.

(3)
Any apportionment of expenditure as between EEA and non-

EEA expenditure for the purposes of this Part is to be made on a

just and reasonable basis.

(4)
The Treasury may by regulations—

(a)
amend the percentage specified in subsection (1);

(b)
amend subsection (2).

(5)
See also sections 1217N and 1217NA (which are about the giving

of relief provisionally on the basis that the EEA expenditure

condition will be met).

1217GC
“Core expenditure”

(1)
In this Part “core expenditure”, in relation to a theatrical

production, means expenditure on the activities involved in—

(a)
producing the production, and

(b)
closing the production.

(2)
The reference in subsection (1)(a) to “expenditure on the

activities involved in producing the production”—

(a)
does not include expenditure on any matters not directly

involved in producing the production (for instance,

financing, marketing, legal services or storage);

(b)
does not include expenditure on the ordinary running of

the production; but expenditure incurred on or after the

date of the first performance of the production to the

paying general public may fall within subsection (1)(a)

(for instance, if it is incurred in connection with a

substantial recasting or a substantial redesign of the set).

Claim for additional deduction

1217H
Claim for additional deduction

(1)
A company which qualifies for relief in relation to a theatrical

production may claim an additional deduction in relation to the

production.

(2)
A claim under subsection (1) is made with respect to an

accounting period.


(See Schedule 18 to FA 1998, and in particular, Part 9D, for

provision about the procedure for making claims.)

(3)
Where a company has made a claim under subsection (1)—

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(a)
the company’s activities in relation to the theatrical

production are treated for corporation tax purposes as a

trade separate from any other activities of the company

(including activities in relation to any other theatrical

production), and

(b)
the company is entitled to make an additional deduction,

in accordance with section 1217J, in calculating the profit

or loss of the separate trade for the accounting period

concerned.

(4)
The company is treated as beginning to carry on the separate

trade—

(a)
when the production phase begins, or

(b)
if earlier, at the time of the first receipt by the company of

any income from the theatrical production.

(5)
Where the company tax return in which a claim under subsection

(1) is made is for an accounting period later than that in which the

company begins to carry on the separate trade, the company

must make any amendments of company tax returns for earlier

periods that may be necessary.

(6)
Any amendment or assessment necessary to give effect to

subsection (5) may be made despite any limitation on the time

within which an amendment or assessment may normally be

made.

(7)
If the company ceases at any time to meet the conditions in

section 1217FC(1) (meaning of “production company”) in

relation to the production, it is treated as ceasing to carry on the

separate trade at that time.

The separate theatrical trade

1217I
Introduction to sections 1217IA to 1217IF


Where a company is treated under section 1217H(3)(a) as

carrying on a separate trade (“the separate theatrical trade”), the

profits or losses of the trade are calculated for corporation tax

purposes in accordance with sections 1217IA to 1217IF.

1217IA
Calculation of profits or losses of separate theatrical trade

(1)
For the first period of account during which the separate

theatrical trade is carried on, the following are brought into

account—

(a)
as a debit, the costs of the theatrical production incurred

(and represented in work done) to date;

(b)
as a credit, the proportion of the estimated total income

from the production treated as earned at the end of that

period.

(2)
For subsequent periods of account the following are brought into

account—

(a)
as a debit, the difference between the amount (“C”) of the

costs of the theatrical production incurred (and

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represented in work done) to date and the amount

corresponding to C for the previous period, and

(b)
as a credit, the difference between the proportion (“PI”) of

the estimated total income from the production treated as

earned at the end of that period and the amount

corresponding to PI for the previous period.

(3)
The proportion of the estimated total income treated as earned at

the end of a period of account is—


where—


C is the total to date of costs incurred (and represented in

work done);


T is the estimated total cost of the theatrical production;


I is the estimated total income from the theatrical

production.

1217IB
Income from the production

(1)
References in this Part to income from a theatrical production are

to any receipts by the company in connection with the making or

exploitation of the production.

(2)
This includes—

(a)
receipts from the sale of tickets or of rights in the

theatrical production;

(b)
royalties or other payments for use of aspects of the

theatrical production (for example, characters or music);

(c)
payments for rights to produce merchandise;

(d)
receipts by the company by way of a profit share

agreement.

(3)
Receipts that (apart from this subsection) would be regarded as

being of a capital nature are treated as being of a revenue nature.

1217IC
Costs of the production

(1)
References in this Part to the costs of a theatrical production are

to expenditure incurred by the company on—

(a)
the activities involved in developing, producing, running

and closing the production, or

(b)
activities with a view to exploiting the production.

(2)
This is subject to any provision of the Corporation Tax Acts

prohibiting the making of a deduction, or restricting the extent to

which a deduction is allowed, in calculating the profits of a trade.

(3)
Expenditure which, apart from this subsection, would be

regarded as being of a capital nature only because it is incurred

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on the creation of an asset (i.e. the theatrical production) is

treated as being of a revenue nature.

1217ID
When costs are taken to be incurred

(1)
For the purposes of this Part, the costs that have been incurred on

a theatrical production at a given time—

(a)
are those costs of the production that are represented in

the state of completion of the work in progress, but

(b)
do not include any amount that has not been paid unless

it is the subject of an unconditional obligation to pay.

(2)
In accordance with subsection (1)(a)—

(a)
payments in advance of work to be done are ignored until

the work has been carried out;

(b)
deferred payments are recognised to the extent that the

goods or services in question are represented in the state

of completion of the work in progress (but this is subject

to subsection (1)(b)).

(3)
Where an obligation to pay an account is linked to income being

earned from the theatrical production, the obligation is not

treated as having become unconditional unless an appropriate

amount of income is or has been brought into account under

section 1217IA.

(4)
In determining for the purposes of this Part the amount of costs

incurred on a theatrical production at the end of a period of

account, any amount that has not been paid 4 months after the

end of that period is to be ignored.

1217IE
Pre-trading expenditure

(1)
This section applies if, before the company begins to carry on the

separate theatrical trade, it incurs expenditure on activities

falling within section 1217IC(1)(a).

(2)
The expenditure may be treated as expenditure of the separate

theatrical trade and as if incurred immediately after the company

begins to carry on that trade.

(3)
If expenditure so treated has previously been taken into account

for other tax purposes, the company must amend any relevant

company tax return accordingly.

(4)
Any amendment or assessment necessary to give effect to

subsection (3) may be made despite any limitation on the time

within which an amendment or assessment may normally be

made.

1217IF
Estimates


Estimates for the purposes of section 1217IA must be made as at

the balance sheet date for each period of account, on a just and

reasonable basis taking into consideration all relevant

circumstances.



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