One of the emails to land in my in box this week was from HMRC advising me that they had withdrawn an Extra Statutory Concession (ESC) covering “Theatre Angels”. I was intrigued!
On clicking on the link within the email I discovered that, historically, HMRC gave special treatment to “Theatre angels” regarding the taxation of profits and losses arising from the backing of theatrical productions. This is now to be withdrawn from 31 March 2017. As a consequence of this treatment a practice had grown up whereby profits due to angels were treated as a deductible expense of the production as opposed to a distribution of profit.
With the proposed withdrawal of the ESC and the introduction of Theatre Tax relief in September 2014 this practice should not continue and distributions of profit must be regarded as just that.
For corporate investor angels HM Revenue and Customs (HMRC) accepts the proposition that the consideration given for the use of the principal represents a commercial return and so can agree that s1000 (1) paragraph E Corporation Tax Act 2010 is not in point. Thus the precedence given to paragraph E by paragraph F (b) and also s1032 (1) (c) will not apply for UK corporates. As a consequence the interest is not treated as a distribution and will be deductible as an expense.
The individual investor position will be affected and HMRC propose to withdraw the continuation of this practice for all new productions from 1 April 2017. Productions currently using the practice and those commencing the practice before that date may continue to use the “grandfathering” arrangements until 31 March 2019.
Affected companies and productions should notify HMRC of their intention to take advantage of the “grandfathering” arrangements by 31 December 2016. Such notifications should be sent to des.ryan@hmrc.gsi.gov.uk stating the name of both the company and the relevant production.
Guidance on HMRC withdrawal of Extra-Statutory Concession (ESC) A94: Theatre Angels
