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HMRC internal manual

Theatre Tax Relief

HM Revenue & Customs
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Taxation: profit/loss calculation: expenditure: nature

Part 15C Corporation Tax Act 2009 (CTA 2009)

Where profits or losses of the separate theatrical trade of a Theatre Production Company (TPC) are within the rules in Part 15C CTA 2009 (TTR20010), the expenditure to be brought into account in calculating the profit or loss will be all the expenditure on:

  • the activities involved in developing, producing, running and closing the production, and
  • activities with a view to exploiting the production.

Expenditure which would otherwise be treated as capital because it relates to the creation of the theatrical production (rights in which would be reflected as an asset on the balance sheet) is treated as revenue expenditure.  This treatment extends only to costs that relate to the creation of an asset (the theatrical production) – so it does not apply to expenditure on the acquisition of plant and machinery since that would be capital regardless of the creation of the production.

The rules in Part 15C CTA 2009 determine how income and expenditure of theatrical production are brought into account as debits and credits in computing the profit of the separate theatrical trade. These rules take precedence over the intangibles regime for expenditure which is related to making the production (S808A Corporation Tax Act 2009).

Where income or expenditure is not related to making the production and is subject to a specific tax regime (for example because it is proper to the loan relationships or intangibles regimes) the computational rules in those regimes will take priority, as they do for other trades.  Any trading debit or credit arising from those regimes will then be brought into account in addition to those for TTR.

The normal rules determining whether particular items are allowable for tax purposes in computing the profits of a trade (see BIM42051+ of the Business Income Manual) still apply.

For more information on the loan relationships legislation in particular, see CFM30000+ of the Corporate Finance Manual.


Company A is a TPC carrying on a separate theatrical trade in relation to a production.  In the year, income from the production to be brought into account as a credit is £2000. Costs of the production to be brought into account as a debit are £1500, which include £150 spent on entertaining.  The production is financed by a loan on which interest of £100 is payable.  The cash from the loan is deposited in the bank and interest of £50 is receivable.

The credits and debits for the year are therefore:

Credits  Debits
Income from production  £2,000
Production expenditure  £1,500
Interest received  £50
Interest paid   £100

The loan is a trading loan relationship while the deposit with the bank is a non-trading loan relationship.  The debit for interest paid is therefore deducted in computing the profit on the separate theatrical trade while the credit for interest received will be a non-trading loan relationship credit.  A computational adjustment is needed to disallow the expenditure on entertaining giving a net debit for costs of the production of £1350 (£1,500 - £150).

The computation of the profit or loss on the separate theatrical trade will therefore be made up of the following debits and credits:

Income from production £2,000
Costs of production (£1,350)
Interest paid (£100)
Profit   £350

The requirement to treat capital expenditure as being on revenue account only applies where the expenditure is on creation of the theatrical production, and would otherwise be treated as expenditure on creation of an asset.

The revenue treatment of expenditure does not apply to the purchase of capital items, such as lighting equipment.  Expenditure on these items remains capital expenditure and capital allowances will be available where appropriate.

No double deductions

Expenditure is not deductible under Part 15C CTA 2009 if it has been relieved under the reliefs available for Research and Development (R&D) expenditure (CIRD80000 of the Corporate Intangibles Research & Development Manual).  These reliefs are the SME scheme, large company scheme and the Research and Development Expenditure Credit scheme.