Theatre Tax Relief: detailed guidance released
HMRC has at last published more detailed guidance in their manuals on theatre tax relief (TTR), which has been available from 1 September 2014 to Theatrical Production Companies (TPCs). The relief entitles a TPC to additional tax relief for expenditure on a qualifying theatrical production, of 25% for touring productions and 20% for other qualifying productions. The credit can take the form of an additional deduction in computing taxable profits, or, if that creates or increases a loss, a payable tax credit. The repayable credit will be 20% for a touring production and 16% for others, based on the current 21% corporation tax rate.
The TTR is available to TPCS that are within the charge to corporation tax, therefore, charities and other not for profit organisations can qualify, even if they are not in fact taxpaying due to exemptions applying to their various sources of income. They should be aware, however, that the claiming of TTR may restrict their ability to claim grants or similar forms of State aid for the same production. Subject to the usual considerations on charitable status, the role of the TPC can be undertaken by the charity itself, or by a wholly owned trading subsidiary. The most appropriate structure will depend on individual circumstances and VAT implications will also need to be considered.
The deduction or tax credits are calculated by reference to core expenditure – expenditure directly incurred in producing and closing the production, and excluding development and normal running costs - up to a maximum of 80% of total core expenditure by the TPC.
The definitions of qualifying TPCs and qualifying theatrical productions are complex and need to be considered in detail for each case. Careful identification of the costs which can be considered core expenditure will also be needed to maximise the benefit of claims. The HMRC guidance gives useful detailed explanations and examples for these areas and of how the relief can be calculated and utilised.
For advice on applying for theatre tax relief, please contact Helen Berg or your usual haysmacintyre adviser.
Not for Profit Tax Director