Orchestra Tax Relief: taxation: separate trade: commencement
S1217RD (4) Corporation Tax Act 2009 (CTA 2009)
Where a company is an Orchestral Production Company (OPC) for the purposes of Part 15D CTA 2009, a qualifying orchestral production is treated as a separate orchestral trade if Orchestral Tax Relief (OTR) is claimed in respect of that production. This isolates each orchestral production on an individual basis for the purposes of calculating profits and losses.
The point at which this trade starts is determined by special rules but, once set up, the normal rules apply for when a trade ceases.
The normal rules for deciding when a trade commences do not apply when deciding when a separate orchestral trade commences. Special rules apply instead.
The OPC is treated as commencing a new orchestral trade on the earliest of:
- commencement of the production phase, or
- receipt of income for the production.
- if it is a series for which an election has been made the above apply to the first concert specified in the election
Commencement triggered by production expenditure
In many cases, the separate orchestral trade will commence when the production begins the concert production phase. This means that as soon as the OPC begins to incur production expenditure on an orchestral concert or series of concerts, a separate orchestral trade relating only to that concert or series begins. Income and expenditure relating to the concert or series is then accounted for in relation to that trade using the OTR rules.
Commencement triggered by receipt of income
In some cases, the separate orchestral trade will commence before the production phase starts if the OPC receives income relating to the orchestral concert or series For example, the commencement of the separate orchestral trade may be triggered when an OPC receives a grant to help fund development activity of a production or from advance sales of tickets.
This ensures that all orchestral concert income is taxable as trading income. This income will be offset by pre-trading expenditure brought into account on the commencement of the separate orchestral trade. However, it may produce taxable profits if insufficient expenditure has been incurred by the end of the accounting period.
The fact that the OPC has commenced a separate orchestral trade does not necessarily mean that the production phase has commenced.