Back in September 2014 as part of an amendment to the Finance Act 2014, the Chancellor George Osborne announced a new tax relief for UK Theatre companies. Introduced as an addition to the already existent creative tax reliefs for film, animation, video games, and high-end television industries, Theatre Tax Relief was created to provide support and promote investment into the UK theatre industry.
Over a year since it was first introduced HMRC have just published a comprehensive guide providing a full breakdown of the rules governing Theatre Tax Relief (TTR) but just who can claim and how does it work? We provide a high level summary below:
Who is eligible
Theatre Tax Relief is open to all companies involved in the running of a ‘theatrical production’ which the government defines as ‘a dramatic production or a ballet that is not specifically excluded by the legislation from being regarded as a theatrical production’. In simplistic terms this includes the following:
- Dance productions
- At least 25% of the core expenditure must relate to expenditure on goods and services within the Europe Economic Area (EEA)
- The company must be directly involved in the production. This means that the company should have responsibilities within the production process and plays a key role in decision-making.
- Each performance must be performed live. Productions which are live streamed and/or recorded also qualify as long as the live streaming or recording is not the main objective of the companies activities.
- The majority of live performances must be intended for commercial purposes, or provided for educational purposes.
What tax breaks are on offer through Theatre Tax Relief?
TTR is available as either an enhanced deduction against income (which effectively reduces taxable profits from the production), or as a payable tax credit.
TTR is claimed on 80% of qualifying expenditure (see below) and overall loss on the theatrical production trade. There are two rates of relief:
- 25% for touring productions
- 20% for all other qualifying productions
Expenditure is only eligible if it is directly related to the production, for example, salaries and production costs, costumes, set design and rehearsal space. Indirect costs including marketing, advertising, financing, legal services or running costs are excluded.
If your production straddles two financial years you will need to allocate income and expenditure accordingly.
Example - A non-touring play
Rehearsal space £ 10,000
Costumes £ 5,000
Set Designer £ 25,000
Salaries £ 30,000
Dress-rehearsal production costs £ 10,000
Marketing and promotion £ 20,000
Total expenditure = £100,000
Total qualifying expenditure = £ 80,000
(80% of qualifying expenditure = £64,000)
Non-touring tax relief= 20% of £64,000 = £ 12,800
If this were a touring production, the tax relief would increase to £16,000 saving the company an additional £3,200 in tax.
How Theatre Tax Relief can benefit your company
Whether your company is big or small, Theatre Tax Relief can save your company money and particularly foe companies who tour internationally TTR can be of particular benefit. Unlike Film Tax Relief TTR is not subject to a cultural test, and it is only a requirement that 25% of expenditure is incurred in the EEA.
How to claim
Theatre Tax Relief is claimed alongside your company’s annual tax return.
To find out if your company is eligible to claim, or if you have any questions about Theatre Tax Relief please contact us for a free consultation.