Finance (No. 2) Bill (HC Bill 155)

(2) No more than one company can be the production company in
relation to a concert.

(3) If more than one company meets the conditions in subsection (1) in
relation to a concert, the company that is most directly engaged in
5the activities mentioned in that subsection is the production
company.

(4) If no company meets the conditions in subsection (1), there is no
production company in relation to the concert.

CHAPTER 2 Taxation of activities of production company

10Separate orchestral trade

1217Q Separate orchestral trade

(1) Subsection (2) applies to a company in relation to a concert if—

(a) the company qualifies for orchestra tax relief in relation to the
production of the concert (see section 1217RA(2)), and

(b) 15the concert is not included in a concert series in relation to
which the company has made an election under subsection
(4).

(2) The company’s activities in relation to the production of the concert
are treated as a trade separate from any other activities of the
20company (including activities in relation to the production of any
other concert).

(3) Subsections (4) and (5) apply to a company in relation to concerts in
a series if the conditions in section 1217RA(4)(a), (b), (c) and (d) are
met in relation to the company and the concert series.

(4) 25The company may, for the purposes of this Part, make an election in
relation to the concert series.

See section 1217QA for provision about making an election.

(5) Where the company makes an election in relation to a concert series
(and accordingly qualifies for orchestra tax relief in relation to the
30production of the series), the company’s activities in relation to the
production of the concert series are treated as a trade separate from
any other activities of the company (including activities in relation to
the production of any other concert).

(6) In this Part the separate trade mentioned in subsection (2) or (5) is
35called the “separate orchestral trade”.

(7) If the separate orchestral trade relates to a single concert, the
company is treated as beginning to carry on that trade—

(a) at the beginning of the pre-performance stage of the concert,
or

(b) 40if earlier, at the time of the first receipt by the company of any
income from the production of the concert.

1217QA Election for concert series

(1) An election under section 1217Q(4) must be made by the company by
notice in writing to an officer of Her Majesty’s Revenue and Customs
before the date of the first concert in the series.

(2) 5An election has effect in relation to the orchestral concerts specified
in it, and must also specify which of those concerts (if any) are not to
be qualifying orchestral concerts (see section 1217RA(3)).

(3) An election—

(a) may have effect in relation to concerts in two or more
10accounting periods, and

(b) is irrevocable.

(4) If the separate orchestral trade relates to a concert series, the
company is treated as beginning to carry on that trade—

(a) at the beginning of the pre-performance stage of the first
15concert in the series, or

(b) if earlier, at the time of the first receipt by the company of any
income from the production of the concert series.

Profits and losses of separate orchestral trade

1217QB Calculation of profits or losses of separate orchestral trade

(1) 20This section applies for the purpose of calculating the profits or
losses of the separate orchestral trade.

(2) For the first period of account during which the separate orchestral
trade is carried on, the following are brought into account—

(a) as a debit, the costs of the production of the concert or concert
25series incurred to date;

(b) as a credit, the proportion of the estimated total income from
that production treated as earned at the end of that period.

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

(a) 30as a debit, the difference between the amount (“C”) of the
costs of the production of the concert or concert series
incurred 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
35estimated total income from that production treated as
earned at the end of that period and the amount
corresponding to PI for the previous period.

(4) The proportion of the estimated total income treated as earned at the
end of a period of account is—

40

1217QC 5 Income from the production

(1) References in this Chapter to income from a production of a concert
or concert series are to any receipts by the company in connection
with the production or exploitation of the concert or concert series.

(2) This includes—

(a) 10receipts from the sale of tickets or of rights in the concert or
concert series;

(b) royalties or other payments for use of the concert or concert
series;

(c) payments for rights to produce merchandise;

(d) 15receipts 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.

1217QD Costs of the production

(1) References in this Chapter to the costs of a production of a concert or
20concert series are to expenditure incurred by the company on—

(a) activities involved in developing and putting on the concert
or concert series, or

(b) activities with a view to exploiting the concert or concert
series.

(2) 25This 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 on the creation
30of an asset (the concert or concert series) is treated as being of a
revenue nature.

1217QE When costs are taken to be incurred

(1) For the purposes of this Chapter, the costs that have been incurred
on a production of a concert or concert series at a given time do not
35include any amount that has not been paid unless it is the subject of
an unconditional obligation to pay.

(2) Where an obligation to pay an amount is linked to income being
earned from the production of the concert or concert series, the
obligation is not treated as having become unconditional unless an
40appropriate amount of income is or has been brought into account
under section 1217QB.

1217QF Pre-trading expenditure

(1) This section applies if, before the company begins to carry on the
separate orchestral trade, it incurs expenditure on activities falling
45within section 1217QD(1)(a).

(2) The expenditure may be treated as expenditure of the separate
orchestral 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
5other 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.

1217QG 10 Estimates

Estimates for the purposes of section 1217QB 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.

CHAPTER 3 Orchestra tax relief

15Introduction

1217R Overview of orchestra tax relief

(1) Relief under this Chapter (“orchestra tax relief”) is given by way of—

(a) additional deductions (see sections 1217RD to 1217RF), and

(b) orchestra tax credits (see sections 1217RG to 1217RJ).

(2) 20See Schedule 18 to FA 1998 (in particular, Part 9D) for provision
about the procedure for making claims for orchestra tax relief.

Companies qualifying for orchestra tax relief

1217RA Companies qualifying for orchestra tax relief

(1) Subsection (2) applies in the case of an orchestral concert which is not
25included in a concert series in relation to which an election has been
made under section 1217Q(4).

(2) A company qualifies for orchestra tax relief in relation to the
production of a concert if—

(a) the concert is a qualifying orchestral concert,

(b) 30the company is the production company in relation to the
concert,

(c) the company intends that the concert should be performed
live—

(i) before the paying public, or

(ii) 35for educational purposes, and

(d) the EEA expenditure condition is met in relation to the
concert (see section 1217RB).

(3) In this Part “qualifying orchestral concert” means an orchestral
concert—

(a) 40in which the instrumentalists number at least 12, and

(b) in which none of the musical instruments to be played, or a
minority of those instruments, is electronically or directly
amplified.

(4) A company qualifies for orchestra tax relief in relation to the
5production of a concert series if—

(a) the concert series is a qualifying orchestral concert series,

(b) the company is the production company in relation to every
concert in the series,

(c) the company intends that all or a high proportion of the
10concerts in the series should be performed live—

(i) before the paying public, or

(ii) for educational purposes,

(d) the EEA expenditure condition is met in relation to the series,
and

(e) 15the company has made an election under section 1217Q(4) in
relation to the series.

(5) In this section “qualifying orchestral concert series” means two or
more orchestral concerts, all or a high proportion of which are
qualifying orchestral concerts.

(6) 20For the purposes of this section a concert is “live” if it is to an
audience before whom the musicians are actually present.

(7) A concert is not regarded as performed for educational purposes if
the production company is, or is associated with, a person who—

(a) has responsibility for the beneficiaries, or

(b) 25is otherwise connected with the beneficiaries (for instance, by
being their employer).

(8) For the purposes of subsection (7), a production company is
associated with a person (“P”) if—

(a) P controls the production company, or

(b) 30P is a company which is controlled by the production
company or by a person who also controls the production
company.

(9) In this section—

• “the beneficiaries” means persons for whose benefit the concert
  35will or may be performed;

• “control” has the same meaning as in Part 10 of CTA 2010 (see
  section 450 of that Act).

(10) There is further related provision in section 1217RL (tax avoidance
arrangements).

1217RB 40 The EEA expenditure condition

(1) The “EEA expenditure condition” is that at least 25% of the core
expenditure on the production of the concert or concert series
incurred by the company is EEA expenditure.

(2) In this Part “EEA expenditure” means expenditure on goods or
45services 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) 5amend the percentage specified in subsection (1);

(b) amend subsection (2).

(5) See also sections 1217T and 1217TA (which are about the giving of
relief provisionally on the basis that the EEA expenditure condition
will be met).

1217RC 10 “Core expenditure”

(1) In this Part “core expenditure”, in relation to the production of a
concert or concert series, means expenditure on the activities
involved in producing the concert or concert series.

(2) The reference in subsection (1) to “expenditure on the activities
15involved in producing the concert or concert series” includes
expenditure on travel to and from a venue which is not a usual venue
for concerts produced by the company.

(3) But that reference does not include—

(a) expenditure on any matters not directly involved with
20putting on the concert or concerts (for instance, financing,
marketing, legal services or storage),

(b) speculative expenditure on activities not involved with
putting on the concert or concerts, and

(c) expenditure on the actual performance or performances (for
25instance, payments to musicians for their performances in the
concert or concert series).

Additional deduction

1217RD Claim for additional deduction

(1) A company which qualifies for orchestra tax relief in relation to the
30production of a concert or concert series may claim an additional
deduction in relation to the production.

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

(3) Where a company has made a claim, the company is entitled to make
35an additional deduction, in accordance with section 1217RE, in
calculating the profit or loss of the separate orchestral trade for the
accounting period concerned.

(4) Where the company tax return in which a claim is made is for an
accounting period later than that in which the company begins to
40carry on the separate orchestral trade, the company must make any
amendments of company tax returns for earlier periods that may be
necessary.

(5) Any amendment or assessment necessary to give effect to subsection
(4) may be made despite any limitation on the time within which an
45amendment or assessment may normally be made.

1217RE 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 1217RD is calculated as
follows.

(2) 5For the first period of account during which the separate orchestral
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) 10if 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—

(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

20P 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).

1217RF “Qualifying expenditure”

(1) 25In this Chapter “qualifying expenditure”, in relation to the
production of a concert or concert series, means core expenditure
(see section 1217RC) on the production that—

(a) falls to be taken into account under sections 1217QB to
1217QG in calculating the profit or loss of the separate
30orchestral trade for tax purposes, and

(b) is not expenditure which is otherwise relievable.

(2) For the purposes of this section expenditure is otherwise relievable if
it is expenditure in respect of which (assuming a claim were made)
the company would be entitled to—

(a) 35film tax relief under Chapter 3 of Part 15,

(b) television tax relief under Chapter 3 of Part 15A,

(c) video games tax relief under Chapter 3 of Part 15B,

(d) an additional deduction under Part 15C (theatrical
productions), or

(e) 40a theatre tax credit under Part 15C.

Orchestra tax credits

1217RG Orchestra tax credit claimable if company has surrenderable loss

(1) A company which qualifies for orchestra tax relief in relation to the
production of a concert or concert series may claim an orchestra tax

credit in relation to the production for an accounting period in which
the company has a surrenderable loss.

(2) Section 1217RH sets out how to calculate the amount of any
surrenderable loss that the company has in the accounting period.

(3) 5A company making a claim may surrender the whole or part of its
surrenderable loss in the accounting period.

(4) The amount of the orchestra tax credit to which a company making
a claim is entitled for the accounting period is 25% of the amount of
the loss surrendered.

(5) 10The company’s available loss for the accounting period (see section
1217RH(2)) is reduced by the amount surrendered.

1217RH 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
15orchestral 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—

(3) 25The “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 1217RG, or

(b) carried forward under section 45 of CTA 2010 and set against
30profits of the separate orchestral trade.

(4) For the first period of account during which the separate orchestral
trade is carried on, the available qualifying expenditure is the
amount that is E for that period for the purposes of section
1217RE(2).

(5) 35For any period of account after the first, the available qualifying
expenditure is—

(6) If a period of account of the separate orchestral 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.

1217RI 5 Payment in respect of orchestra tax credit

(1) If a company—

(a) is entitled to an orchestra tax credit for an accounting period,
and

(b) makes a claim,

10the 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) an orchestra tax credit, or

(b) interest on an orchestra tax credit under section 826 of ICTA,

15may 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
20enquired into by the Commissioners, no payment in respect of an
orchestra 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
25a provisional basis of such amount as they consider appropriate.

(4) No payment need be made in respect of an orchestra 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) 30under 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
35Benefits (Northern Ireland) Act 1992.

(5) A payment in respect of an orchestra tax credit is not income of the
company for any tax purpose.

1217RJ Limit on State aid

In accordance with Commission Regulation (EU) No. 651/2014 of 17
40June 2014 declaring certain categories of aid compatible with the
internal market, the total amount of orchestra tax credits payable
under section 1217RI in the case of any undertaking is not to exceed
50 million euros per year.

1217RK No account to be taken of amount if unpaid

(1) 45In determining for the purposes of this Chapter the amount of costs
incurred on a production of a concert or concert series at the end of a

period of account, ignore any amount that has not been paid 4
months after the end of that period.

(2) This is without prejudice to the operation of section 1217QE (when
costs are taken to be incurred).

5Anti-avoidance etc

1217RL Tax avoidance arrangements

(1) A company does not qualify for orchestra tax relief in relation to the
production of a concert or concert series if there are any tax
avoidance arrangements relating to the production.

(2) 10Arrangements 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
  15understanding, whether or not legally enforceable;

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

1217RM Transactions not entered into for genuine commercial reasons

(1) A transaction is to be ignored for the purpose of determining
20orchestra tax relief so far as the transaction is attributable to
arrangements (other than tax avoidance arrangements) entered into
otherwise than for genuine commercial reasons.

(2) In this section “arrangements” and “tax avoidance arrangements”
have the same meaning as in section 1217RL.

CHAPTER 4 25Losses of separate orchestral trade

1217S Application of sections 1217SA to 1217SC

(1) Sections 1217SA to 1217SC apply to a company which is treated
under section 1217Q(2) or (5) as carrying on a separate trade in
relation to the production of a concert or concert series.

(2) 30In those sections—

(a) “the completion period” means the accounting period in
which the company ceases to carry on the separate orchestral
trade;

(b) “loss relief” includes any means by which a loss might be
35used to reduce the amount in respect of which a company, or
any other person, is chargeable to tax.

1217SA Restriction on use of losses before completion period

(1) Subsection (2) applies if a loss is made by the company in the
separate orchestral trade in an accounting period preceding the
40completion period.