These FAQs are a modest attempt to make Theatre Tax Relief more palatable. If you want the real thing, go to gov.uk !
If you are a Theatrical Production Company, and you are producing a Qualifying Theatrical Production, HMRC could potentially give you money, up to 20% of the Core Expenditure.
You must be eligible for corporation tax to be able to claim TTR. Therefore, if you are a sole trader or self-employed, you cannot claim TTR.
Is eligible for Theatre Tax Relief:
- A company (limited by shares or by guarantee)
- A charitable incorporated organisation (CIO)
- A Community Interest Company (CIC)
Even if you don’t pay tax, for example because of a charitable status, you can claim TTR. You just need to be eligible for Corporation Tax with HMRC.
There is no ‘artistic quality’ criteria for TTR. No need to be Arts Council England funded at all. No need to be a ‘cultural’ production. No need to be a Registered Charity.
Any production which is a Qualifying Theatrical Production as defined by HMRC can qualify.
There is no artistic quality criteria but there is an artistic genre or type criteria: see Qualifying Theatrical Production for more on this.
The Theatrical Production Company (TPC) must produce, run and close the production.
It means:
- Decision making
- Creative control
- Negotiation and effective payments of all expenditure
The TPC can hire sub-contractors, as long as the decisions and responsibilities are in the TPC.
A production can only have one TPC claiming TTR. In case of coproduction, only one of the co-producers can claim. It is usually better practice to gather all payments to goods and services under that TPC, and that creative decisions are taken in that TPC too.
- Any kind of drama or ballet with some exceptions
- With live performances where the public pays
- Or for educational purposes
- 25% at least of the core expenditure must be done in the European Economic Area
- There is no artistic quality criteria
Exceptions are:
- advertisement disguised as drama
- where there is a competition or contest
- where there is a wild animal
- of a sexual nature
- where recording is the main object of the performance
Most circus shows where there is some kind of character definition qualify for theatre tax relief.
The core expenditure is the qualifying expenditure from which to calculate the relief.
The core expenditure includes only the following phases of the theatrical production:
- Pre-production
- Closure
The core expenditure excludes costs such as:
- Running costs
- Any marketing
- Legal and financial
- Storage
And also:
- There are subtleties regarding the development costs, which can under certain circumstances qualify or partly qualify.
If this describes your theatrical production:
- more than 80% of the core expenditure is in the UK*
- The production is making a loss
Then HMRC pays to you a tax credit/relief of:
- 20% of the core expenditure for a touring production
- 16% of the core expenditure for a non-touring production
This is a very simple example, for more complex example with actual rates please see an example for a loss-making production, or this example for a profit-making production.
* in reality it works with the whole EEA.
The European Economic Area (EEA) is made of 31 countries: the 28 countries of the European Union (EU) plus Iceland, Lichtenstein and Norway.
EEA includes UK!
There are two rates:
- 16% for a non-touring production (actually 20% of 80%)
- 20% for a touring production (actually 25% of 80%)
The basis on which to apply the ratio is the lesser of:
- the qualifying core expenditure
- the adjusted (enhanced) loss
- To understand this better please refer to our examples
A touring production is one of these two:
- Either more than 6 venues (and no minimum number of performances)
- Or at least 2 venues with a total of at least 14 performances
Any production which is not a touring production is a non-touring production.
Loss making means here: “loss making for the purpose of TTR”. Since we don’t take grants as income, sometimes what you think is a profit making production could in fact be a loss making production for TTR (I know, right!).
Figures in brackets are negative figures.
1. Calculate profit or (loss)
The profit and loss calculation for TTR only takes into account the “earned income” part of the income of the production. Grants are not “earned income”.
Let’s assume your production’s earned income is £80
| Earned income (EI) (excluding grants) |
80 |
| Total expenditure (TE) | (£110) |
| Profit / (Loss)f or TTR (P&L) | (£30) |
2. Calculate core expenditure
| Core expenditure in the EEA (CEEA) | £65 |
| Core expenditure outside the EEA | £5 |
| Total Core expenditure (CE) | £70 |
| Running costs | £25 |
| Other costs (e.g. marketing) | £15 |
| Total expenditure (TE) | £110 |
| Enhancement is the lesser of: | |
| 80% of (CE) Core expenditure 80% of £70 = £56 |
Core expenditure in the EEA (CEEA) £65 |
| Enhancement (E): £56 | |
3. Calculate Enhanced Profit / (Enhanced Loss)
| Profit / (Loss) (P&L) | (£30) |
| Enhancement (E) | (£48) |
| Enhanced Profit / (Enhanced Loss) (EL) | (£78) |
4. Calculate surrendable loss
| The surrendable loss is the lesser of: | |
| Enhanced loss (EL) (£78) |
80% of (CE) Core Expenditure (£56) |
| Surrendable Loss (SL): (£56) |
|
5. Calculate tax credit
| Surrendable Loss (SL): (£56) |
|
| Touring production
Rate: 25% |
Non-touring production
Rate: 20% |
| Your eligible tax credit is: | Your eligible tax credit is: |
| £56 x 25% = £14 | £56 x 20% = £11.5 |
Congratulations, you survived the maths!
Profit making means here: “profit making for the purpose of TTR”. Since we don’t take grants as income, sometimes what you think is a profit making production could in fact be a loss making production for TTR (I know, right!).
Figures in brackets are negative figures.
1. Calculate profit or (loss)
The profit and loss calculation for TTR only takes into account the “earned income” part of the income of the production. Grants are not “earned income”.
Let’s assume your production’s earned income is £130
| Earned income (EI) (excluding grants) |
£130 |
| Total expenditure (TE) | (£110) |
| Profit / (Loss)f or TTR (P&L) | £20 |
2. Calculate core expenditure
| Core expenditure in the EEA (CEEA) | £65 |
| Core expenditure outside the EEA | £5 |
| Total Core expenditure (CE) | £70 |
| Running costs | £25 |
| Other costs (e.g. marketing) | £15 |
| Total expenditure (TE) | £110 |
| Enhancement is the lesser of: | |
| 80% of (CE) Core expenditure 80% of £70 = £56 |
Core expenditure in the EEA (CEEA) £65 |
| Enhancement (E): £56 | |
3. Calculate Enhanced Profit / (Enhanced Loss)
| Profit / (Loss) (P&L) | £20 |
| Enhancement (E) | (£48) |
| Enhanced Profit / (Enhanced Loss) (EL) | (£28) |
4. Calculate surrendable loss
| The surrendable loss is the lesser of: | |
| Enhanced loss (EL) (£28) |
80% of (CE) Core Expenditure (£56) |
| Surrendable Loss (SL): (£28) |
|
At this stage if the surrendable loss is positive, then it means you won’t have a Theatre Tax Credit. But you can still use the Enhancement as an additional deduction on your corporation tax return. However this is not useful if you do not pay corporation tax, for example because of your charitable status.
Now if the surrendable loss is negative:
5. Calculate tax credit
| Surrendable Loss (SL): (£28) |
|
| Touring production
Rate: 25% |
Non-touring production
Rate: 20% |
| Your eligible tax credit is: | Your eligible tax credit is: |
| £28 x 25% = £7 | £28 x 20% = £5.6 |
Congratulations, you survived the maths!
Theatre Tax Relief is claimed from HMRC through the Corporation Tax return.
1. provide the paperwork known as “supplementary information”:
- Showing that the production is a Qualifying Theatrical Production with promotion material, link to websites etc.
- If you want to qualify as a Touring Production, proof of the tour, venues and number of performances
- A spreadsheet with the calculation of the Core Expenditure, where you allocate each expenditure to development, production, running, closing and non-qualifying
2. File with HMRC
- After the end of your tax period
- Fill the relevant boxes in Corporation Tax form CT600 , Theatre Tax Relief is under “Creative Tax Relief” headings
- Send also the appropriate supplementary information in pdf format
- File using HMRC online, or an appropriate tax software , or ask an accountant to do it
- We want to encourage small theatre companies to claim Theatre Tax Relief
- We provide this plain-English FAQ about Theatre Tax Relief to play down the Tax bit and magnify the Relief bit!
- We are launching a survey about your relationship with Theatre Tax Relief, please participate!
- More on the About Us page
Sounds very interesting to me as the Chair of Trustees of a CIO: INK(from Pen to Performance). We don’t officially make a loss because as a Registered Charity we have at least to break even. The problem is getting someone to fill in the form and the time it will take. Employing an accountant to do it is an expense we cannot really afford. Will the gain be worth the energy expended or the cost of engaging an accountant? Liked the website
The loss is for each production taken individually, not for the charity as a whole. If you remove all general expenses, overheads etc. from each production, then each production is more likely to make a loss. Is it worth it: that’s definitely a good question. Maybe ask for a quote to a couple of accountants.
Is the gain worth hiring an accountant – It completely comes down to the figures you’re working with. We specialise in TTR claims so are familiar with most scenarios. If your pre-pro and closing costs are considerable then yes it is worth involving an accountant – clients should look at the TTR accounting cost as a zero as it can be deducted from the TTR claim so no cost to you. Plus you can always combine productions and do one claim at the year end instead of one each time to reduce costs. Get into contact if you would like to chat further – gemma.jeynes@nlpca.co.uk.
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