MGETR90020 - Museums and Galleries Exhibition Tax Relief; avoidance; inflation of costs

S1218ZCB Corporation Tax Act 2009 (CTA 2009)

 

The legislation of Museums and Galleries Exhibition Tax Relief (MGETR) is based on the legislation already in place for Film Tax Relief (FTR).  FTR was designed to ensure that it did not suffer from abuses similar to those of the previous tax relief regimes for films.

The previous film tax regime was subject to regular abuse by those seeking a means to avoid tax. One such abuse was the artificial inflation of the actual level of production expenditure through the inclusion of deferred fees or other contingent costs, such as participations, which might never arise in practice.

The tax regime for exhibitions includes features intended to ensure that it does not suffer from similar abuse in the future.

Recognition of expenditure

Where a Museums and Galleries Exhibition Production Company (MGEPC) claims MGETR in respect of an exhibition, there are rules for determining when expenditure on that exhibition is recognised for the purposes of the basic tax computation under Part 15E CTA 2009.

Under these rules:

  • expenditure is recognised to the extent it is represented in the state of completion of the exhibition
  • any amount of that which has not actually been paid is only recognised where its payment by the MGEPC in the future is unconditional
  • costs relating to an obligation that is linked to income being earned from the exhibition can only be brought into account to the extent that the relevant income is brought into account.

Unpaid amounts

In calculating an additional deduction under MGETR, any amount that has not been paid 4-months after the end of the relevant period of account is excluded, irrespective of whether there is an unconditional obligation for it to be paid in the future.

Deferments or contingent fees unpaid four months after the end of the relevant period should be disregarded for the purposes of calculating a claim for MGETR, even where such costs are subject to an unconditional obligation to be paid.

This disregard does not apply to the basic tax computation.