OTR70030 - Orchestra Tax Relief: calculation: rate of relief
S1217RG Corporation Tax Act 2009
Where an Orchestral Production Company (OPC) claims Orchestra Tax Relief (OTR) in respect of enhanceable expenditure the amount of Orchestra Tax Credit (OTC) to which it is entitled is 25% of the loss surrendered.
The value of OTR will depend on whether or not the separate orchestral trade is loss-making and the prevailing rate of Corporation Tax.
The examples below show the value of OTR assuming in each case that:
- at least 80% of the total core expenditure is European core expenditure, and
- the rate of Corporation Tax is 19%.
Example 1
OPC with sufficient taxable profits to absorb all of the additional deduction
Enhanceable expenditure = 80% of total expenditure
Value of OTR
= 80% x 19%
= 15.2% (reduction in Corporation Tax payable)
Example 2
OPC has no taxable profits and claims the maximum amount of orchestra tax credit
Enhanceable expenditure = 80% of total expenditure
Value of OTR
= 80% x 25%
= 20% (orchestra tax credit)
This means that there will normally be both a timing benefit and an overall financial benefit to surrendering losses for an orchestra tax credit. However, this might not be the case where the special terminal losses rules apply.
The anti-avoidance provisions for OTR prevent a company artificially inflating production costs in order to increase relief or orchestra tax credit. These provisions will also apply to the situation where income is not recognised or deferred to increase the surrenderable loss.