TTR55120 - Calculation: surrenderable losses and Theatre Tax Credit – example – multi-period production
The following example illustrates how a Theatrical Production Company (TPC) that sustains a surrenderable loss can surrender that loss in return for a Theatre Tax Credit (TTC) (TTR55100). In this case the production spans two periods.
As with the additional deduction (TTR55050), the calculation of the TTC is cumulative where the production takes more than one period to complete.
Example
A TPC makes a qualifying production with total core expenditure of £1m, all of which is UK expenditure. The production was commissioned by a producer which pays £900k for it. The production qualifies as a touring production.
The production takes two periods of account to make, and the TPC incurs expenditure of £400k in the first period and £600k in the second. The commissioning producer pays the TPC £500k in the first period and the remaining £400k in the second.
In order to establish the profit or loss made in each accounting period, the TPC should apply the income recognition rules, rather than the amount which the commissioning producer actually pays during each period (TTR20220).
In this example, the income is calculated on the basis of the proportion of total expenditure incurred in each period multiplied by the estimated total income.
The TPC elects to surrender the full amount of losses possible for TTC.
First period
- |
Amount |
|---|---|
Estimated income |
£360k (£400k/£1m x £900k) |
Expenditure |
(£400k) |
Trading loss before Theatre Tax Relief (TTR) |
(£40k) |
Theatre Tax Relief - additional deduction |
(£320k) |
Trading loss after TTR |
(£360k) |
The surrenderable loss for the first accounting period is the lesser of:
- the £360k available loss, and
- the £320k additional deduction.
Therefore, only £320k of the loss can be surrendered. Assuming the rates from 1 April 2025 apply (TTR10800), this gives a TTC of £144k (45% TTC rate for touring productions x £320k loss surrendered).
The remaining loss of £40k (£360k - £320k) is carried forward.
Second period
- |
Amount |
|---|---|
Income |
£540k (£900k - £360k) |
Expenditure |
(£600k) (£1m - £400k) |
Trading loss before Theatre Tax Relief (TTR) |
(£60k) |
Theatre Tax Relief - additional deduction |
(480k) |
Trading loss after TTR |
(£540k) |
The surrenderable loss for the second accounting period is the lesser of:
- the £580k available loss (£540k trading loss after TTR plus the £40k loss brought forward), and
- the £480k additional deduction.
Therefore, only £480k of the loss can be surrendered, giving a TTC of £216k (45% TTC rate for touring productions x £480k loss surrendered).
The remaining £100k loss (£580k - £480k) can be carried forward, or treated as a terminal loss if the trade ceases (TTR30040).
Cumulative effect
This means that the TTC is worth £360k over the two periods (£144k + £216k), the same as it would have been had the production been made in a single period.
This is provided that claims for TTC are made in both periods.
Summary
- |
Period 1 |
Period 2 |
|---|---|---|
Expenditure incurred to end of period (all UK) |
£400k |
£1m |
Additional deduction to end of period (in this example 80% of total core expenditure) |
£320k |
£800k |
Less additional deduction claimed for earlier period(s) |
£nil |
(£320k) |
Additional deduction due for the period |
£320k |
£480k |
Estimated total income attributed to period |
£360k |
£540k |
Expenditure attributed to period |
£400k |
£600k |
Additional deduction due for the period |
£320k |
£480k |
Trading profit/(loss) after TTR |
(£360k) |
(£540k) |
Surrenderable loss |
(£320k) |
(£480k) |