CFM95780 - Interest restriction: tax-EBITDA: Orchestra Tax Relief

TIOPA10/S407(3)(i)

Companies which are engaged in the production of qualifying live orchestral performances are entitled to claim orchestra tax relief. Deductions for Orchestra Tax Relief under CTA09/S1217RD and Orchestra tax credits claimed under CTA09/S1217RG are excluded from the calculation of adjusted corporation tax earnings when determining a company’s tax-EBITDA.

Qualifying companies can claim:

• an additional tax deduction of 100% of qualifying expenditure incurred on the production and performance of the orchestral performance; or
• if the company makes a loss, a repayable tax credit of 25% of the loss up to the amount of qualifying expenditure.

Effect for tax-EBITDA purposes

Orchestra 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 Orchestra Tax Relief beyond the intention of the original relief.

Consequently, additional deductions and tax credits received under s1217RD and s1217RG respectively should not be brought into account when calculating taxable total profits of the period to determine a company’s tax-EBITDA.