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HMRC internal manual

Museums and Galleries Exhibition Tax Relief

Museums and Galleries Exhibition Tax Relief: Taxation: Profit/loss calculation: Income - Timing

S1218ZBA, S1218ZBD Corporation Tax Act 2009 (CTA 2009)

Where the separate exhibition trade of a Museums and Galleries Exhibition Production Company (MGEPC) is within the rules of Part 15E CTA 2009, income is recognised and expenditure is incurred in line with current accounting principles.  This is the case even where the production expenditure would not be recognised in the profit and loss account in some instances because the company is creating a capital asset for exploitation.

For more details on this matching of income to expenditure, see MGETR30250.

This treatment results in profits being recognised as production progresses and not just at completion, unless there are specific contingencies outside the control of the person doing the work.

For accounting periods beginning before 1 January 2015, the method of calculating profits or losses of the separate exhibition trade for tax purposes broadly follows the model provided by Statement of Standard Accounting Practice 9 - ‘Stocks and long-term contracts’ (SSAP9).

For accounting periods beginning on or after 1 January 2015, UK businesses will follow Financial Reporting Standard 102 (FRS 102).  This will effectively replace SSAP9.  In practical terms, there should be little change as to when revenue is first recognised.

The amount of income to be recognised at the end of an accounting period is given by a formula (MGETR30250).  This measures the state of completion of the exhibition by reference to the production expenditure to date, compared to the estimated total production expenditure on the exhibition.  We would expect future income to be discounted before being brought into this formula.

When the exhibition is closed there will generally be no further expected expenditure on its production.  If the rights to the exhibition are sold outright there will also be no further expenditure on its exploitation.  All the known estimated income will have been recognised and any further income should be recognised as it is earned.