Theatre Tax Relief
Who can qualify for Theatre Tax Relief?
In order to qualify the company must be involved with decision-making and directly negotiate contracts and pay for rights, goods and services. It must also be involved throughout development from pre-production until completion.
Your company can claim if:
- It is a live performance telling a story that is either a play, opera, musical or a ballet
- Performances are intended for the paying public or provided for educational purposes
- At least 25% of the core costs must relate to activities within the United Kingdom or European Economic Area (this applies post-brexit, however legislation may change)
Theatre Tax Relief is not available in respect of:
- advertisements or promotional programs for goods or services
- is of a sexual nature
- use of live performances with wild animals
- One of the main objects is to make a recording
How much can you claim?
Qualifying companies can claim an additional deduction on their Corporation Tax Return which will reduce their profits or increase any loss thereby reducing their Corporation Tax liability. As an alternative they can surrender a loss in return for a repayable tax credit.
The additional deduction will be the lower of:
- 80% of the total core expenditure
- the amount of core expenditure in the United Kingdom or European Economic Area
Essentially, core expenditure is expenditure incurred on pre-production, principal photography and post-production. It excludes expenditure on development, distribution or other nonproduction activities.
If the company is shown to make a loss after applying the additional deduction on it’s Corporation Tax Return, all or part of the loss can be surrendered in return for a repayable tax credit at a rate of 45%.
There is also a higher repayable tax credit rate of 50% if your production is touring. Your production will be classed as touring if:
- There is a minimum of 14 performances in at least 2 separate venues
- There is a minimum of 6 performances in 6 separate venues
The claim should be made within one year of the company’s filing date and can be amended or withdrawn within that period.
In March 2023, it was announced in the Spring Budget that the higher rates of 45%/50% reliefs will be extended till April 2025 and then tapered down to 20%/25% from April 2026 onwards.
Working examples for Theatre Tax Relief
A theatre company puts on a production of Mama Mia in the West End. It is intended to be performed at one venue. It generates income of £2m in their current financial year and as part of putting on the production it has total costs of £1.7m
Of the £1.7m in costs during the financial year it has qualifying core expenditure of £600,000(1) .
Of the same £1.7m in costs during the financial year it has qualifying core expenditure of £400,000(2) which was spent within the UK/EEA region.
Corporation Tax filing would be as follows if Theatre Tax Relief was not applied:
Income: £2,000,000
Expenditure: £1,700,000
---------------
Profit/Loss: £ 300,000
Corporation Tax Liability: £ 75,000
(£300,000 x 25%)
Corporation Tax filing would be as follows if Theatre Tax Relief was applied:
Income: £2,000,000
Expenditure: £1,700,000
Additional Deduction: £ 400,000
(lesser of (1) 80% of £600,000 and (2) £400,000)
---------------
Profit/Loss: £ (100,000)
Repayable Tax Credit: £ 45,000
(£100,000 x 45%)
As the theatre production company made a loss of £100,000 after applying the additional deduction permitted under Theatre Tax Relief, it would not pay any Corporation Tax, but would receive a repayable tax credit of £45,000. A difference of £120,000 which they could potentially invest in other projects.
Next Steps
If you or your organisation have a potential claim for tax relief, or would like further information about the process you can get in touch with us to arrange a no obligation meeting either by phone or in person.
Make A Theatre Tax Relief Enquiry
KNOWLEDGE BASE
OTHER SERVICES WE PROVIDE
Contact us
+44 (0) 121 633 2000
enquiries@friendllp.com
Birmingham office:
Eleven Brindleyplace,
2 Brunswick Square,
Birmingham, B1 2LP
Registered to carry out audit work in the UK and regulated for a range of investment business activities by the Institute of Chartered Accountants in England and Wales
Company registration number: 07746831