Theatre Tax Relief - How Does it Work?

Creative industry corporation tax reliefs are a suite of seven tax relief schemes that allow qualifying companies to claim an enhanced tax deduction, or in some circumstances claim a repayable tax credit when calculating their taxable profits.

Theatre Tax Relief (TTR) is part of this suite of tax reliefs for creative industries introduced by the Government to encourage and promote growth in areas, such as the performing arts where the UK potentially has a competitive advantage.

The seven reliefs consist of:

• Film Tax Relief (FTR)
• Animated Tax Relief (ATR)
• High-end Television Tax Relief (HTR)
• Children’s Television Tax Relief (CTR)
• Video Games Tax Relief (VGTR)
• Theatre Tax Relief (TTR)
• Orchestra Tax Relief (OTR)

They work a bit like R&D tax credits, by increasing the amount of allowable expenditure against your taxable profits.

TTR is one of the lesser-known forms of government financial aid available, but the Theatre Tax Relief scheme, should be a key consideration for a range of businesses, not just those traditionally associated with theatre.

Any company staging a live performance where the performers play a role can make a claim based on expenditure incurred in producing and closing the event.

WHAT IS THEATRE TAX RELIEF?

The TTR scheme is designed to benefit both profitable and loss-making companies, as well as those who may be able to claim an exemption from corporation tax. It works by reducing the amount of taxable profits for production companies so as to reduce their tax liability. In cases where the production company is loss-making, losses relating to the production can be boosted and surrendered in return for a cash tax credit.

Essentially, for every £100 spent on producing a theatrical production, an amount of £180 of relief could be obtained. Therefore, the effective net production cost for a profitable company would only be £64 per £100 spent.

If the company was loss making for the period, then they may be able to surrender all or part of the loss and claim a repayable tax credit from HMRC. The surrendered amount is the lower of:

• The unrelieved trading loss; and
• 80% of the core production expenditure
• The repayment is 20% (25% for touring productions) of the surrendered loss.

WHO CAN BENEFIT FROM THEATRE TAX RELIEF?

Companies will qualify for Theatre Tax Relief if they:

• Are a theatre production company; and
• Produce a qualifying theatrical production; and
• Intend at the outset that a high proportion of the live performances are to be given to paying members of the general public or for educational purposes; and
• At least 25% of the core expenditure incurred in producing the production is incurred within the (European Economic Area) EEA.

Article by

Roy Butcher

Partner

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