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HMRC internal manual

Theatre Tax Relief

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HM Revenue & Customs
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Calculation: additional deduction – multi-period production

S1217J Corporation Tax Act 2009

Where the phases of production of a theatrical production cover more than one period of account, Theatre Tax Relief (TTR) operates on a cumulative basis.  This means that:

  • in the first period of account the Theatrical Production Company’s (TPC’s) additional deduction is determined by the amount of core expenditure incurred within that period
  • in subsequent periods of account, including the completion period, the additional deduction is calculated by reference to total core expenditure incurred to date less the total amount of additional deductions given for previous periods.

Example: production continues for multiple periods

A TPC makes a qualifying production with total core expenditure of £1m, of which 75% is EEA core expenditure and 25% is non-EEA expenditure.  The phases of production span three accounting periods.  The separate theatrical trade ceases at the end of the third accounting period.

Expenditure on the production is eligible for TTR.  Over the three periods of account, the profile of core expenditure is:

  EEA core (£k) Non-EEA core (£k) Total cumulative core (£k)
       
First period 350   350
Second period 350 100 800
Third period 50 150 1,000
Total expenditure 750 250 1,000

First period

In the first period of account, because all the core expenditure is EEA expenditure, the additional deduction is calculated on the basis of 80% of the total core expenditure (80% x £350k).  The additional deduction for the first period is therefore £280k.

Second period

At the end of the second period of account, the total core expenditure to date is £800k, of which £700k is EEA expenditure.

Because EEA core expenditure is greater than 80% of total core expenditure (80% x £800k = £640k), the additional deduction is calculated by reference to 80% of the total core expenditure incurred to date (80% x £800k) less the additional deduction for the first period (£280k).

The additional deduction for the second period is therefore £360k (£640k - £280k).

Third period (completion period)

At the end of the third period of account, the completion period, total core expenditure is £1m, of which £750k is EEA expenditure.

Because EEA core expenditure is less than 80% of total core expenditure (80% x £1m = £800k), the additional deduction is calculated by reference to EEA expenditure incurred to date (£750k) less the total amount of additional deductions given for the earlier periods (£280k + £360k = £640k).

The additional deduction for the third period, the completion period, is therefore £110k (£750k - £640k).

Cumulative effect

The cumulative effect at the end of the three periods of account is that TTR is provided on the 75% of total core expenditure that was also EEA expenditure.

Summary

  Period 1 Period 2 Period 3
       
EEA core expenditure (cumulative) £350k £700k £750k
Non-EEA core expenditure (cumulative) £nil £100k £250k
Total core expenditure (cumulative) £350k £800k £1m
EEA expenditure as % of total core expenditure 100% 87.5% 75%
Additional deduction to end of period £280k £640k £750k
Less additional deduction claimed for earlier period(s) -(£280k) (£640k)  
Additional deduction due for the period £280k £360k £110k