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Notices of Amendments: 25 June 2014                     

274

 

Finance Bill, continued

 
 

“Tax relief for theatrical production

 

Schedule (Tax relief for theatrical production) contains provision about relief in

 

respect of theatrical productions.”

 

Mr Chancellor of the Exchequer

 

NS4

 

To move the following Schedule—

 

“Tax relief for theatrical production

 

Part 1

 

Amendments of CTA 2009

 

1          

Before Part 16 of CTA 2009 insert—

 

“Part 15C

 

theatrical productions

 

Introduction

 

1217F

 Overview

 

(1)    

This Part contains provision about tax relief for production companies

 

in respect of their theatrical productions.

 

(2)    

Sections 1217FA to 1217FC define “production company” and

 

“theatrical production”.

 

(3)    

Section 1217G sets out the conditions a production company must

 

meet to qualify for relief in relation to its theatrical production.

 

(4)    

Section 1217H provides for relief by way of additional deductions in

 

respect of certain expenditure (and section 1217J is about the amount

 

of the additional deduction).

 

(5)    

This Part also contains provision—

 

(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.


 
 

Notices of Amendments: 25 June 2014                     

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Finance Bill, continued

 
 

(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—

 

(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).


 
 

Notices of Amendments: 25 June 2014                     

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Finance Bill, continued

 
 

(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 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.


 
 

Notices of Amendments: 25 June 2014                     

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Finance Bill, continued

 
 

(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).

 

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


 
 

Notices of Amendments: 25 June 2014                     

278

 

Finance Bill, continued

 
 

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)—

 

(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.


 
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