HMRC has confirmed that ESC A94 is to be withdrawn from 31 March 2017. The government consulted at the beginning of the year on its intention to withdraw this concession, along with eight other ESCs. The introduction of theatre tax relief from September 2014 means this concession is no longer needed.
The concession gave special taxation treatment to profits and losses of ‘theatre angels’ arising from the backing of theatrical productions, allowing theatre companies to make payments in respect of such investments without deduction of tax. This has led to the practice whereby profits due to angels were treated as a deductible expense of the production, as opposed to a distribution of profit.
HMRC accepts, nevertheless, that theatre companies may continue to treat interest paid to corporate investor angels as an expense, rather than a distribution.
Payments to individual investors will have to be treated as distributions, following the withdrawal of the concession, although HMRC will allow ‘grandfathering’ of the current practice until 31 March 2019. Companies and productions affected should notify HMRC of their intention to take advantage of the grandfathering arrangements by 31 December 2016.
HMRC has confirmed that ESC A94 is to be withdrawn from 31 March 2017. The government consulted at the beginning of the year on its intention to withdraw this concession, along with eight other ESCs. The introduction of theatre tax relief from September 2014 means this concession is no longer needed.
The concession gave special taxation treatment to profits and losses of ‘theatre angels’ arising from the backing of theatrical productions, allowing theatre companies to make payments in respect of such investments without deduction of tax. This has led to the practice whereby profits due to angels were treated as a deductible expense of the production, as opposed to a distribution of profit.
HMRC accepts, nevertheless, that theatre companies may continue to treat interest paid to corporate investor angels as an expense, rather than a distribution.
Payments to individual investors will have to be treated as distributions, following the withdrawal of the concession, although HMRC will allow ‘grandfathering’ of the current practice until 31 March 2019. Companies and productions affected should notify HMRC of their intention to take advantage of the grandfathering arrangements by 31 December 2016.
