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What is Theatre Tax Relief?
Theatre Tax Relief was introduced on 1 September 2014. Since then, we have claimed back over £1,140,000 in cash repayments for our clients.
Theatre Tax Relief allows eligible production companies to claim back cash repayments on qualifying expenditure on producing theatrical productions.
Who can make a claim for Theatre Tax Relief?
Firstly, you have to be a ‘theatre production company’. By definition, that means you are within the charge to corporation tax. So, if you’re an individual, a trust, a partnership, or an unincorporated association, you won’t be able to qualify.
Charities often think that they will not be able to claim the relief because they don’t pay corporation tax, however, charities are within the charge to corporation tax, but most of their income will be exempt. So, if you are a SCIO or a charity that is limited by guarantee, you will be able to make a claim.
What costs qualify for Theatre Tax Relief?
There are various phases to putting on a theatre production. The first phase is when you are considering whether or not you will go ahead with the production. Once the decision has been made to proceed, you then go into phase two, the production phase, i.e., casting, rehearsals, and costume design. The third phase is when the production is running, and performances are being shown to the public. The fourth phase is when you are closing the production and striking the set.
There are four stages, but only the costs relating to the production and the striking of the set will qualify for Theatre Tax Relief. The costs that you have incurred in the development phase i.e., when you were considering whether you would go ahead with the production, and the running of the production itself, will not qualify for the relief.
However, the direct costs relating to production and the striking of the set will qualify for the relief. Examples of these would be, the making of the stage scenery and the actors’ time during rehearsals. Indirect costs, such as, marketing, finance, and legal costs do not qualify.
Under the previous rules, at least 25% of the qualifying expenditure had to be spent in the European Economic Area (EEA) but changes have come in from 1 April 2024 and now 10% of qualifying expenditure needs to be UK expenditure, subject to transitional provisions and exceptions.
What types of productions qualify?
Qualifying productions are theatrical productions (including ballet) which can be a play, an opera, a musical or a relevant dramatic piece where the actors, singers, dancers or other performers are playing roles.
At the beginning of the production phase, you must intend that all or a high proportion of the performances of the production will be live. A performance is ‘live’ if it is to an audience before whom the performers are actually present.
How do you make a claim for Theatre Tax Relief?
The claim forms part of your theatre production company’s corporation tax return. Separate profit and loss accounts for each production must be prepared and included in the claim. We regularly assist our clients in making sure they capture and gather all the costs that qualify.
What are the rates that can be claimed?
For productions where the production phase started before 27 October 2021, relief will apply at rates of 20% for non-touring productions and at 25% for touring productions which is equivalent to 16p or 20p per £1 of qualifying expenditure respectively.
From 27 October 2021 to 31 March 2025 the rates have increased to 45% and 50% respectively. This is equivalent to 36p or 40p per £1 qualifying expenditure respectively. These rates apply to productions where the production phase started on or after 27 October 2021.
From 1 April 2025, the rates will be 40% for non-touring exhibitions and 45% for touring exhibitions which is equivalent to 32p or 36p per £1 qualifying expenditure. The government has announced the intention that these rates will be “permanent”.
There is a limit on the amount of payable theatre tax relief credit which can be claimed which is calculated by looking at the lower of the theatre production company’s loss for the accounting period in the separate theatrical trade and the qualifying expenditure incurred on the theatrical production.
How long do I have to submit a claim?
The TTR claim must be submitted within two years from the end of the accounting period. For example, a claim for the year ended 31 March 2024 must be submitted by 31 March 2026. But the sooner the TTR claim is submitted, the sooner the organisation will receive the cash repayment.
From 1 April 2024, an Additional Information Form (AIF) must also be submitted before or on the same day as the corporation tax return is submitted. The AIF must contain basic details about your organisation and its productions including the start dates of each production phase.
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The information in this article is of a general nature and seeks to highlight some of the issues which could be affecting you and/or your business, including changes to financial regulation and legislation. Readers should not rely on this information without seeking professional advice on its application in their circumstances.