Session 2014 - 15
Internet Publications
Other Bills before Parliament


 
 

Notices of Amendments: 27 June 2014                     

357

 

Finance Bill, continued

 
 

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.

 

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;


 
 

Notices of Amendments: 27 June 2014                     

358

 

Finance Bill, continued

 
 

(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 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—equation: cross[over[char[C],char[T]],char[I]]

 

    

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.


 
 

Notices of Amendments: 27 June 2014                     

359

 

Finance Bill, continued

 
 

(3)    

Expenditure which, apart from this subsection, would be regarded as

 

being of a capital nature only because it is incurred 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.


 
 

Notices of Amendments: 27 June 2014                     

360

 

Finance Bill, continued

 
 

Amount of additional deduction

 

1217J

 Amount of additional deduction

 

(1)    

The amount of an additional deduction to which a company is entitled

 

as a result of a claim under section 1217H is calculated as follows.

 

(2)    

For the first period of account during which the separate theatrical

 

trade is carried on, the amount of the additional deduction is E,

 

where—

 

E is—

 

(a)    

so much of the qualifying expenditure incurred to date as is EEA

 

expenditure, or

 

(b)    

if less, 80% of the total amount of qualifying expenditure

 

incurred to date.

 

(3)    

For any period of account after the first, the amount of the additional

 

deduction is—equation: plus[char[E],minus[char[P]]]

 

    

where—

 

E is—

 

(a)    

so much of the qualifying expenditure incurred to date as is EEA

 

expenditure, or

 

(b)    

if less, 80% of the total amount of qualifying expenditure

 

incurred to date, and

 

P is the total amount of the additional deductions given for previous

 

periods.

 

(4)    

The Treasury may by regulations amend the percentage specified in

 

subsection (2) or (3).

 

1217JA 

 “Qualifying expenditure”

 

(1)    

In this Part “qualifying expenditure”, in relation to a theatrical

 

production, means core expenditure (see section 1217GC) on the

 

theatrical production that—

 

(a)    

falls to be taken into account under sections 1217IA to 1217IF

 

in calculating the profit or loss of the separate theatrical trade

 

for tax purposes, and

 

(b)    

is not excluded by subsection (2).

 

(2)    

The following expenditure is excluded—

 

(a)    

expenditure in respect of which the company is entitled to an

 

R&D expenditure credit under Chapter 6A of Part 3;

 

(b)    

expenditure in respect of which the company has obtained

 

relief under Part 13 (additional relief for expenditure on

 

research and development).

 

Theatre tax credits

 

1217K

Theatre tax credit claimable if company has surrenderable loss

 

(1)    

A company which—

 

(a)    

is treated under section 1217H(3) as carrying on a separate

 

trade during the whole or part of an accounting period, and

 

(b)    

has a surrenderable loss in that period,


 
 

Notices of Amendments: 27 June 2014                     

361

 

Finance Bill, continued

 
 

    

may claim a theatre tax credit for that accounting period.

 

(2)    

Section 1217KA sets out how to calculate the amount of any

 

surrenderable loss that the company has in the accounting period.

 

(3)    

A company making a claim may surrender the whole or part of its

 

surrenderable loss in the accounting period.

 

(4)    

The amount of the theatre tax credit to which a company making a

 

claim is entitled for the accounting period is—

 

(a)    

25% of the amount of the loss surrendered if the theatrical

 

production is a touring production, or

 

(b)    

20% of the amount of the loss surrendered if the theatrical

 

production is not a touring production.

 

(5)    

The company’s available loss for the accounting period (see section

 

1217KA(2)) is reduced by the amount surrendered.

 

(6)    

A theatrical production is a “touring production” only if the company

 

intends at the beginning of the production phase—

 

(a)    

that it will present performances of the production in 6 or

 

more separate premises, or

 

(b)    

that it will present performances of the production in at least

 

two separate premises and that the number of performances

 

will be at least 14.

 

(7)    

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

 

about the procedure for making claims under subsection (1).

 

1217KA 

Amount of surrenderable loss

 

(1)    

The company’s surrenderable loss in the accounting period is—

 

(a)    

the company’s available loss for the period in the separate

 

theatrical trade (see subsections (2) and (3)), or

 

(b)    

if less, the available qualifying expenditure for the period (see

 

subsections (4) and (5)).

 

(2)    

The company’s available loss for an accounting period is—equation: plus[char[L],times[char[R],char[U],char[L]]]

 

    

where—

 

L is the amount of the company’s loss for the period in the separate

 

theatrical trade, and

 

RUL is the amount of any relevant unused loss of the company (see

 

subsection (3)).

 

(3)    

The “relevant unused loss” of a company is so much of any available

 

loss of the company for the previous accounting period as has not

 

been—

 

(a)    

surrendered under section 1217K, or

 

(b)    

carried forward under section 45 of CTA 2010 and set against

 

profits of the separate theatrical trade.

 

(4)    

For the first period of account during which the separate theatrical

 

trade is carried on, the available qualifying expenditure is the amount

 

that is E for that period for the purposes of section 1217J(2).


 
 

Notices of Amendments: 27 June 2014                     

362

 

Finance Bill, continued

 
 

(5)    

For any period of account after the first, the available qualifying

 

expenditure is—equation: plus[char[E],minus[char[S]]]

 

    

where—

 

E is the amount that is E for that period for the purposes of section

 

1217J(3), and

 

S is the total amount previously surrendered under section 1217K.

 

(6)    

If a period of account of the separate theatrical trade does not coincide

 

with an accounting period, any necessary apportionments are to be

 

made by reference to the number of days in the periods concerned.

 

1217KB 

Payment in respect of theatre tax credit

 

(1)    

If a company—

 

(a)    

is entitled to a theatre tax credit for an accounting period, and

 

(b)    

makes a claim,

 

    

the Commissioners for Her Majesty’s Revenue and Customs (“the

 

Commissioners”) must pay the amount of the credit to the company.

 

(2)    

An amount payable in respect of—

 

(a)    

a theatre tax credit, or

 

(b)    

interest on a theatre tax credit under section 826 of ICTA,

 

    

may be applied in discharging any liability of the company to pay

 

corporation tax.

 

    

To the extent that it is so applied the Commissioners’ liability under

 

subsection (1) is discharged.

 

(3)    

If the company’s company tax return for the accounting period is

 

enquired into by the Commissioners, no payment in respect of a

 

theatre tax credit for that period need be made before the

 

Commissioners’ enquiries are completed (see paragraph 32 of

 

Schedule 18 to FA 1998).

 

    

In those circumstances the Commissioners may make a payment on a

 

provisional basis of such amount as they consider appropriate.

 

(4)    

No payment need be made in respect of a theatre tax credit for an

 

accounting period before the company has paid to the Commissioners

 

any amount that it is required to pay for payment periods ending in that

 

accounting period—

 

(a)    

under PAYE regulations,

 

(b)    

under section 966 of ITA 2007 (visiting performers), or

 

(c)    

in respect of Class 1 national insurance contributions under

 

Part 1 of the Social Security Contributions and Benefits Act

 

1992 or Part 1 of the Social Security Contributions and

 

Benefits (Northern Ireland) Act 1992.

 

(5)    

A payment in respect of a theatre tax credit is not income of the

 

company for any tax purpose.

 

1217KC 

Limit on State aid

 

(1)    

The total amount of any theatre tax credits payable under section

 

1217KB in the case of any undertaking is not to exceed 50 million

 

euros per year.


 
 

Notices of Amendments: 27 June 2014                     

363

 

Finance Bill, continued

 
 

(2)    

In this section “undertaking” has the same meaning as in the General

 

Block Exemption Regulation.

 

(3)    

In this section “the General Block Exemption Regulation” means any

 

regulation that—

 

(a)    

is for the time being in force under Article 1 of Council

 

Regulation (EC) No 994/98, and

 

(b)    

makes, in relation to aid in favour of culture and heritage

 

conservation, the declaration provided for by that Article.

 

Anti-avoidance etc

 

1217LA 

Tax avoidance arrangements

 

(1)    

A company does not qualify for relief in relation to a theatrical

 

production if there are any tax avoidance arrangements relating to the

 

production.

 

(2)    

Arrangements are “tax avoidance arrangements” if their main purpose,

 

or one of their main purposes, is the obtaining of a tax advantage.

 

(3)    

In this section—

 

“arrangements” includes any scheme, agreement or understanding,

 

whether or not legally enforceable;

 

“tax advantage” has the meaning given by section 1139 of CTA 2010.

 

1217LB 

Transactions not entered into for genuine commercial reasons

 

(1)    

A transaction is to be ignored for the purpose of determining a relief

 

mentioned in subsection (2) so far as the transaction is attributable to

 

arrangements (other than tax avoidance arrangements) entered into

 

otherwise than for genuine commercial reasons.

 

(2)    

The reliefs mentioned in subsection (1) are—

 

(a)    

any additional deduction which a company may make under

 

this Part, and

 

(b)    

any theatre tax credit to be given to a company.

 

(3)    

In this section “arrangements” and “tax avoidance arrangements” have

 

the same meaning as in section 1217LA.

 

Use of losses

 

1217M

 Application of sections 1217MA to 1217MC

 

(1)    

Sections 1217MA to 1217MC apply to a company that is treated under

 

section 1217H(3) as carrying on a separate trade in relation to a

 

theatrical production.

 

(2)    

In those sections—

 

“the completion period” means the accounting period in which the

 

company ceases to carry on the separate theatrical trade;

 

“loss relief” includes any means by which a loss might be used to reduce

 

the amount in respect of which a company, or any other person, is

 

chargeable to tax.


 
previous section contents continue
 

© Parliamentary copyright
Revised 27 June 2014