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HMRC internal manual

Orchestra Tax Relief

Orchestra Tax Relief: taxation: profit/loss calculation: matching income to expenditure

S1217QB, S1216QG Corporation Tax Act 2009 (CTA 2009)

Part 15D CTA 2009 sets out how the profits and losses of a separate orchestral trade of an Orchestral Production Company (OPC) that makes an Orchestral Tax Relief (OTR) claim are calculated for tax purposes.

The method is modelled on the way in which profits are recognised in long-term contracts. This means recognising expected income in line with the state of completion of the concert or series as measured by the proportion of total costs to date that has been expended.

It operates by:

  • calculating what proportion of the orchestral concert or series’ estimated total costs have been incurred (and are reflected in work done) within each accounting period, and
  • allocating the production’s estimated total income in similar proportions.


This method will adjust for both changes to the estimated total income from the concert or series (for example, sale of further rights) and to changes in the estimated total cost (due, for example, to a change of plans during production).

In the calculation:

  • the estimated total cost of the concert or series will be the expected cost of making the orchestral concert or series plus any expected exploitation costs and
  • the estimated total income will be all the expected income from the concert or series.


Estimated costs and income

An OPC may need to estimate both total expected costs and total expected income to be able to operate the formula to determine taxable profits or losses.

Where actual income and costs are known, this estimate is not necessary. 

Estimated total costs

The estimated total cost will generally be the total estimated allowable costs shown by the most recent and reliable estimate in the concert budget, plus a realistic estimated cost to the OPC of exploiting any rights it retains.

Budgets of this sort are generally maintained by OPCs both as a management tool and because their existence is generally a condition imposed by the financiers.

Estimated total income

The estimated total income from the concert or series is the total income, received or expected, from it. The estimate of income should include income from all sources but it should only include income that the OPC is in a position to realistically expect and quantify.  This does not include hypothetical or potential income merely because a prediction of that income has been made such as by a sales agent.  The realistic expectation of income is closer to that included in the statutory accounts.

So the estimated income should broadly include that income which the company would be confident enough to include in its Profit & Loss account were the concert to be treated as being on revenue account.

Whether any particular contract or agreement gives the company rights such that income should be recognised under these rules will be a question of fact.  See below for further detail of how estimates are to be made.

Estimating total income earned at the end of an accounting period

At the end of any accounting period the amount of income treated as earned is calculated as follows:

The income treated as earned = C/T x I

C = Total costs incurred to date on the concert and reflected in work done
I = Estimated total income from the concert
T = Total estimated costs of the concert