Do you know the benefit of Theatre Tax Relief?

10 November 2021

As theatres begin to open their doors once again, many production providers are undoubtedly looking for invaluable financial relief to help alleviate what has been a tough time.

Theatre Tax Relief (TTR) is a little known and generous HMRC tax relief that can potentially offer significant cash benefits for qualifying productions, aimed at supporting and encouraging the creative arts sector in the UK involved with the organisation and running of theatrical productions.

What is Theatre Tax Relief?

TTR provides relief by uplifting the level of qualifying production expenditure for tax purposes by up to 80%.

This is beneficial for both profitable as well as loss making productions. The additional deduction can reduce the amount of taxable profits, or instead increase the amount of tax losses for the period in which the claim is made.

Where the production provider is loss making, there is an additional option to surrender these losses to HMRC for a physical cash repayment. The amount of loss that can be surrendered to HMRC for a cash repayment is the lower of:

  • 80% of total core production expenditure; or
  • The amount of core expenditure on goods or services that are provided from the European Economic Area (EEA) which includes the UK for these purposes.

The cash repayment is calculated by HMRC based on the loss surrendered – this is ordinarily at 20% for non-touring, or 25% of touring productions.

However, the Government announced in the recent 2021 budget the intention to increase the rates of the cultural reliefs for the next two years in the following pattern, with rates for 2023 to 2024 returning to the current (2021 to 2022) levels:

 

Rate %

Current Rates

From 27 October 2021 to 31 March 2023

2023 to 2024

2024 to 2025 (and onwards)

Non-touring / touring

20/25

45/50

30/35

20/25

 

This makes the relief even more attractive.

The qualifying costs for TTR relief are restricted to core expenditure directly involved in the production itself and includes costs incurred on the the physical production in terms of exceptional running costs as well as the costs of closing the production including casting costs, wages, equipment hire, costumes and prop expenditure, special effects and rehearsal costs but to name a few.

Who can qualify?

TTR is available to theatrical production companies as well as charities within the charge to UK Corporation Tax, who carry on a qualifying theatrical production e.g. a play, opera, musical or other dramatic piece.

It is important to note that the theatrical production company or charity which is claiming the TTR must be responsible for producing, running and closing the theatrical production independently.

How AAB can assist?

Given the generosity of the relief, there are understandably a considerable range of qualifying conditions which must be satisfied by the production provider to make an eligible claim. AAB have extensive experience in assisting clients within the Sector claim the associated reliefs available from HMRC.

For further information or assistance, please contact Liam Hosie or your usual Anderson Anderson & Brown contact.

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