CFM95770 - Interest restriction: tax-EBITDA: Theatre Tax Relief

TIOPA10/S407(3)(h)

Deductions and tax credits in relation to theatrical productions under CTA09/S1217H and CTA09S1217K are excluded from the calculation of adjusted corporation tax earnings when determining a company’s tax-EBITDA.

Qualifying Theatrical Production Companies can claim:

• an additional tax deduction of 100% of qualifying expenditure incurred on the production, running and closing the production;
• or if the company makes a loss, a repayable tax credit of 20% (25% for touring performances) of the loss up to the amount of qualifying expenditure.

Further guidance on Theatre Tax Relief can be found at TTR10000 onwards.

Effect for tax-EBITDA purposes

Theatre Tax Relief is one of the qualifying tax reliefs specified as an excluded amount in TIOPA10/S407(3).

Any additional deductions received over and above the actual amount of qualifying expenditure incurred would have a distorting effect of reducing the earned profit of the company for tax-EBITDA purposes, decreasing the group’s interest capacity.

Conversely, the receipt of a tax credit would have the effect of increasing a group’s interest allowance if included as an income item for tax-EBITDA purposes. This would serve to increase the benefit received for companies claiming Theatre Tax Relief beyond the intention of the original relief.

Consequently, additional deductions and tax credits received under s1217H and s1217K respectively, should not be brought into account when calculating taxable total profits of the period to determine a company’s tax-EBITDA.