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HMRC internal manual

Museums and Galleries Exhibition Tax Relief

Museums and Galleries Exhibition Tax Relief; calculation; additional deduction

S1218ZCF Corporation Tax Act 2009

A Museums and Galleries Exhibition Production Company (MGEPC) entitled to Museums and Galleries Exhibition Tax Relief (MGETR) can claim an additional deduction in computing the taxable profits of the separate exhibition trade.

The effect of the additional deduction is to increase the amount of expenditure for tax purposes.  This may decrease the taxable profit of the separate exhibition trade and therefore the amount of Corporation Tax that would otherwise be payable.  It may also create or increase a loss in the separate exhibition trade, some or all of which may be available to surrender for a Museums and Galleries Exhibition Tax Credit (MGETC).

Example: production completed in a single period

A MGEPC undertakes a qualifying exhibition for £100,000, all of which is EEA core expenditure.  It receives £200,000 from exploitation of the exhibition and therefore generates a profit of £100,000 on which it would normally pay Corporation Tax.  The company is subject to Corporation Tax at a rate of 19%.  The production and running of the exhibition all takes place in a single period.

Expenditure on the production of the exhibition is eligible for tax relief.  The company is entitled to an additional deduction in computing its taxable profits/losses of the separate exhibition trade.  Since all of the core expenditure is EEA expenditure, the additional deduction is calculated by reference to 80% of the total core expenditure.

Income £200,000
   
Expenditure (£100,000)
Trading profit (before MGETR): £100,000
MGETR: Additional deduction  
(80% x £100,000 total EEA core expenditure) (£80,000)
Trading profit after MGETR £20,000

Without MGETR, the company would have been liable to pay Corporation Tax of £19,000 (19% corporation tax rate x the pre-MGETR profit of £100,000).

The additional deduction claimed under MGETR reduces the Corporation Tax liability to £3,800 (19% corporation tax rate x the post-OTR profit of £20k).  The benefit of the MGETR claim to the company is therefore £15,200 (£19,000 - £3,800).

In this example, the MGETR is worth 15.2% of the total core expenditure