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HMRC internal manual

Business Income Manual

Theatre backers

S683, S687 Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005), Extra-Statutory Concession (ESC) A94


Theatre backers or ‘angels’ are people who put up money to finance a theatrical production. If the show is successful their money is first repaid, and then they receive a share in any profit. If the show is a failure they may lose not only the possibility of a profit but also part or all of their original investment.

Profits from a production for a particular year are amounts received which do not represent the repayment of the investment. Losses can only be computed when there is no further prospect of a return from the investment.

Unless the angel uses ESC A94, the treatment of profits and losses is as follows:

  • profits are within the charge to Income Tax on annual payments not charged under any other provision (S683 ITTOIA 2005);
  • there is no Income Tax relief for losses;
  • losses may attract Capital Gains Tax loss relief;
  • if an angel works in a trade or profession within the theatre then, depending on the facts, his or her activities as a backer may be part of that trade. But this will not be the case for most angels.

Capital Gains Tax losses are of no use unless the angel has chargeable gains. So, where an angel backs various productions, the strict treatment may result in profits being liable to Income Tax with no relief for losses.


Under ESC A94, UK resident angels can set losses from one show against profits from another. The text of the concession can be found at . The concession operates by applying the miscellaneous income rules to profits or losses arising to UK resident angels from theatre backing. Profits are chargeable to Income Tax under the residual charge for income not charged under any other provision (S687 ITTOIA 2005). Losses may be offset against other miscellaneous income of the year concerned, or carried forward and set off against later miscellaneous income. (See BIM100190 for more on losses on transactions which, if profitable, would be chargeable as miscellaneous income.)

The purpose of the concession is to allow offsetting of losses in this way, not to allow expenses which might be allowed if the income were, in law, liable under the residual charge.

Where the concessionary treatment is given, the loss does not also qualify as a capital loss.

Deduction of tax

The concessional treatment does not change the true nature of payments to the theatre angel. Payers of sums chargeable as annual payments have an obligation to deduct tax from the payment. According to the terms of the concession, HMRC do not insist on deduction of tax from payments to theatre angels for their theatrical investments if the angel’s usual place of abode is in the UK. Payers may, however, exercise the right to deduct tax if they wish.

The place of abode is a practical test which the payer can apply; the payer is not likely to know the residence status of the recipient for tax purposes.

Theatre angels who are not resident in the UK may be able to obtain authority for tax not to be deducted from payments made to them in respect of their theatrical investments, if they are resident in a country which has a Double Taxation Agreement with the UK which contains an ‘other income’ article (see INTM153240). Claims from non-residents for repayment of UK tax and/or applications from non-residents for exemption from deduction of UK tax should be sent to:

Personal Tax International
St John’s House
Merton Road
L75 1BB