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HMRC internal manual

Theatre Tax Relief

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HM Revenue & Customs
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Taxation: separate trade: cessation

S1217H (7) & 1217FC Corporation Tax Act 2009 (CTA 2009)

Where a company is a Theatrical Production Company (TPC) (TTR10110) for the purposes of Part 15C CTA 2009, a qualifying theatrical production (TTR10100) is treated as a separate theatrical trade if Theatre Tax Relief (TTR) is claimed in respect of that production.  This isolates each theatrical 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 (TTR20100) but, once set up, the normal rules apply for when a trade ceases, unless the company ceases at any time to be the TPC in relation to the production.

Normal cessation rules

Guidance at BIM70565+ of the Business Income Manual sets out the normal cessation rules.

The question of whether any trade has ceased is a matter of fact.  A TPC’s trade may include:

  • exploiting a production (TTR20210)
  • selling a production, and all the rights in it, for others to exploit, or
  • making productions under contract to another person such that it never holds any of the rights.

In cases where a production, and all the rights in it, is sold outright, it should be straight forward to determine the point where the trade ceases.

The point of cessation may be less clear where some or all of the rights in the production are retained by the TPC.  Broadly speaking, a trade ceases when the TPC no longer actively exploits, nor has any expectation that income will arise from, the production rights.

Where a TPC retains rights to enjoy future income from the production (possibly coupled to an obligation to make further deferred payments out of those receipts) that income is regarded as deriving from the ongoing trade of theatre production relating to that trade.  This is the case even where receipts follow a ‘stagnant’ period during which no income was received.  The receipts will not relate to any new trade, nor will they be treated as non-trading (investment) income.   

Cessation of separate theatrical trade due to company ceasing to be the TPC for the production

If a company ceases at any time to be the TPC in relation to a theatrical production for which TTR relief has been claimed, the separate theatrical trade is treated as ceasing to carry on the separate trade at that time.

Terminal losses

If a separate theatrical trade ceases, the TPC may be able to use losses under TTR by using the special terminal loss rule (TTR30050).