Theatre Tax Relief is waiting in the wings!

With the festive period now upon us, bringing lots of pantos, musicals and plays, it seems like a good time to reflect on Theatre Tax Relief (TTR).

Having acted in theatre productions in the past, I’m aware of what’s involved in staging a good quality production to a paying audience. Production costs are a significant factor when staging any theatre production and something that all theatres and production companies have to consider, but fear not – there is help!

TTR has been available for qualifying productions of Theatrical Production Company’s (TPCs) since 1st September 2014. This blog will focus on:

  • What is a TPC?, and
  • What is a qualifying production?

What is a Theatrical Production Company?

A company is deemed to be a TPC if:

  • it is responsible for producing, running and closing a production
  • it actively engages in decision-making during the production, running and closing stages
  • it makes an effective, creative, artistic and technical contribution to a production
  • it directly negotiates, contracts and pays for goods, services and rights associated with the production.

What is a ‘qualifying production’?

For a production to qualify, it needs to meet 3 conditions:

  1. The production must be a theatrical production according to TTR40020 of the Corporation Tax Act 2009.
  2. The production must be performed live to a paying audience i.e. the general public, or must be put on for educational purposes.
  3. A minimum of 25% of its core expenditure* must be incurred within the European Economic Area (EEA).

However, as those in the industry are aware, there are many different types of production; so for TTR purposes, a qualifying theatrical production is a production of a play, a musical, an opera or other dramatic piece (whether or not this involves any improvisation) where:

  • the actors, dancers, singers or other performers wholly or mainly play a part
  • each performance that occurs during the run of the production is live, and
  • the live performances are the main object, or are one of the main objects, of the company’s performance activities.

So what does TTR mean for your company? By claiming TTR, a TPC can receive an extra deduction when calculating their taxable profits, and where this extra deduction results in a loss, the TPC can surrender this loss in return for a Theatre Tax Credit (TTC). The loss can be surrendered in full or in part. The current TTC rates are:

  • 20% for non-touring productions, and
  • 25% for touring productions

Example (for a non-touring production):

Income £500,000
Expenditure (£600,000)
Loss before relief £100,000
Enhanced expenditure (80% of £300,000) £240,000
Loss after relief £340,000
Loss available for surrender
Lower of:
Available loss of £340,000
Enhanced expenditure of £240,000 £240,000
Tax credit payable at 20% £48,000

According to The Society of London Theatre (SOLT) and UK Theatre’s survey, TTR has already benefited many companies, with successful claimants stating that the relief has allowed them to be more adventurous; to employ more staff; to conduct more work on audience development; and to simply offset reductions from other sources of funding (uktheatre.org, 2016). Clearly, there are benefits to claiming TTR, but there are still many companies that would like more support and guidance on how it works.

As you can see, my career in acting took a slight diversion into the wonderful world of corporate tax! However, you may still catch me in local productions, so the infamous panto phrase “she’s behind you!” may actually apply!

If you think your company could qualify, or if you have any queries on TTR, then do not hesitate to contact charities@chiene.co.uk.

 

* Core expenditure is costs incurred on producing and closing a production, plus any exceptional running costs.