Theatre Tax Relief (TTR) is a government incentive aimed to support theatre productions. However, many are still not claiming this tax-relief incentive even though it is widely available.
Claiming TTR can mean that the production company can reduce its production costs (also known as pre-performance costs) on average by 20%.
As Theatre Tax Relief is a government incentive, it has certain criteria that must be met.
TTR is offered as a benefit to both profitable and loss-making theatrical companies. One unique aspect is that some businesses that claim corporation tax exemptions can also apply.
Details about the criteria, example calculations, as well as a free TTR calculator and eligibility checker can be found the sections below.
How does Theatre Tax Relief work?
Theatre Tax Relief works by cutting down the profits of production companies and thereby reducing their liability to corporation tax. Where a production company is in a loss-making situation, the loss can be surrendered for cash under the terms of TTR.
Theatre Tax Relief calculation is based upon the expenditure taken to deliver the production and not all costs will qualify for the relief. Costs that don’t qualify for TTR include:
- Core expenditure and the extent to which it relates to goods or services that are provided within the EEA
TTR is only applicable for core UK expenditure, for example:
- Producing the theatrical
- Exceptional running costs
- The closing of the production
The benefits of claiming TTR
Most production companies will benefit receiving a cash payment between 20% and 25% of expenditure incurred prior to the live production. Calculation of claims will vary depending on whether productions are touring or non-touring. Touring productions receiving around 25% cash back and non-touring productions receiving around 20%.
TTR requires certain conditions to be met before making a claim. Some of these include:
- The main focus of the production should be to play to a live audience of paying members of the public, or for the purpose of education.
- A minimum of 25% EEA expenditure
- Both touring and non touring productions can qualify
- There is a need to identify income and expenditure from each qualifying production.
The relief applies to all types of theatre, including dance and circus performances and static or touring.
For the purposes of claiming TTR, HMRC will consider every production as a separate item. Consequently, companies need to identify income and expenditure from each qualifying production.
Productions containing the following elements it will be prevented from claiming TTR:
- The primary purpose of the performance is to promote or advertise any kind of goods or services
- The performance consists of some kind of contest or competition
- A wild animal is performing
- The performance is principally of a sexual type
- One of the main objects of the performance is to make a recording or broadcast
How to claim for Theatre Tax Relief
Production companies can make a claim during the relevant accounting period. A claim is made within the company’s Corporation Tax self-assessment form (CT600). It is also important to advise HMRC of the details of the claim.
Is cultural test required?
Theatrical production companies are not required to pass a cultural test to be eligible to claim theatre tax relief.
Theatre Tax Relief Calculation
How are Theatres Funded?
Theatres productions are a mix of subsidised, unfunded non for profit and commercial theatres. In any case the cos so of putting on a theatrical performance can be extreme.
Whilst London accounts for c.47% of all performances and 43% of venues in England, with the rest of the UK accounting for the remaining 53% of performances. The concentration of theatres in London in comparison with the size of population are considerably disproportionate. This can be seen clearly looking at the North West, where 13% of the national population lives, yet accounts for only 5% of performances.
London attracts strings of hit musicals, a key component to mass attraction and family appeal, this no doubt contributes to the success of theatre in London. Although statistically only about 15% of shows are musicals, it is believed that musicals account for about 30% of total theatrical performances
A theatrical performance is not simply undertaken off the cuff, many hours of preparation, rehearsal, marketing and adjustments are absorbed by any theatre prior to the final production received by the audience.
In many cases a theatre production will incur vast costs throughout the journey to performance on (to name a few)
- Staff e.g. Directors, Admin and finance
- Freelancers e.g. Makeup artists
- Contractors e.g. Marketing and promotion
- Costumes and materials
- Scripts and royalties
- Furniture hire
Even low budget theatres productions cost tens of thousands, when the production becomes larger, longer running, touring and involves guest actors the budget hits £000,000’s plus before the first performance.
With funding being a prime concern, some organisations are looking at other ways of making themselves more sustainable. A range of models now exist in the sector to assist in seeking funding including
- Cultural and social investment
- Loan finance
- Enterprise investment schemes
- Commercial investment and entrepreneurial opportunities
- Tax Relief -Most Importantly Here
Many of these solutions are not widely explored within the theatre sector; however, they do offer opportunities for the future.
Criteria to Claim TTR
For identification of eligible costs, theatrical productions are divided into four phases shown below. It is the ‘Core Expenditure’ directly incurred in producing and closing the production that can be included in the Theatre Tax Relief claim.
TTR Calculation Example
Let’s consider the average theatre production and the types of costs incurred. These range from staff, to venue, to freelance artists, and all are incurred at different times of the production’s lifecycle.
For ease of illustration, let’s assume the costs incurred on a theatrical performance in the accounting year are:
|Venue hire||£ 20,000|
|Set Designer||£ 15,000|
|Makeup artist pre-production||£ 20,000|
|Marketing and promotion||£ 10,000|
|Total expenditure||£ 270,000|
This gives a total expenditure of £270,000. However, TTR can not necessarily be applied to these entire costs.
As with all things tax, there are several steps and conditions to meet:
Step 1. Determine which expenditure is ‘theatrical production expenditure’ or ‘Core Expenditure’ e.g. the activities involved in developing, producing, running, and closing the production.
Any costs that are not within Step 1 are likely to be normal running expenses (e.g. expenses incurred from the first performance onwards) and not allowable for calculating the TTR claim.
Let’s assume, that the following percentages from the total costs relate to Step 1 costs.
|Category||Tot.Cost £||% Step 1||Step 1 Cost £|
|Makeup artist pre-production||20,000||20||20,000|
|Marketing and promotion||10,000||80||8,000|
Step 2. Determine how much of the Step 1 expenditure is incurred in the EEA. By EEA expenditure we are looking to identified the costs of goods or services supplied and carried out within the EEA. This value is needed to determine the element of core expenditure to be included in the calculation for the claim.
If a cost is incurred both in the EEA and not, then a reasonable apportionment must be made.
Let’s assume here all of the cost incurred are from within the EEA. Being £150,000 allowable EEA Core Expenditure.
Step 3. Determine the value of the expenditure to be the foundation of the calculation. Legislation states that this value is
80% of the Total Qualifying expenditure (Step 1) 150,000 x 80% £120,000 or if less
The total EEA core expenditure (Step 2) £150,000
Therefore, the total qualifying expenditure in this example is: £ 120,000
Step 4. Apply the expenditure from Step 3 to the company’s tax position in respect of the production.
If profitable an additional deduction of £120,000 will be set against profits, reducing the company’s tax liability by £22,800 in 2018.
If loss making the additional deduction creates a larger loss for the company which can be surrendered for a cash payment. The maximum available credit in this instance will be:
- Touring productions: 25% x Step 3 = £30,000
- Non-touring productions: 20% x Step 3 = £24,000