Creative arts tax reliefs
WR Partners has extensive experience in claiming back valuable tax relief for the creative sector.
Theatre Tax Relief (“TTR”)
Theatre and live performance companies that produce musicals, dramas, operas etc. are able to claim a relief from HMRC that can increase the allowable expenditure for tax purposes or if the company makes a loss can be surrendered for a tax refund. The relief only applies to qualifying theatrical companies and performances that meet the criteria.
Key points
This relief is available to theatrical productions performed either commercially or for educational purposes. The company can claim an additional deduction from taxable profits or surrender a loss for a cash repayment from HMRC.
At least 25% of the total production costs must relate to activities in the European Economic Area (EEA).
Theatre tax relief only applies to a UK company (including charities) or an overseas company with a UK branch or presence. Partnerships and individuals are not able to claim relief.
Who qualifies for TTR?
The theatre company must be responsible for producing, running and closing the production. They should be actively engaged in decision-making during the production, running and closing phases of the performance. The theatre company should directly negotiate and pay for the goods and services in relation to the production, although it is possible to commission a third party as long as the theatre company is still actively involved in the production.
What is a qualifying theatrical performance?
Production of a play, an opera, a musical, or another dramatic piece where the performers give their performances wholly or mainly by playing a role.
Ballets may only qualify where there is a dramatic narrative. Other forms of dance will not qualify unless an incidental part of a dramatic performance.
A dramatic production will not qualify if the main purpose, or one of its main purposes, is to advertise or promote goods or services. Crucially, the performance cannot be or include a competition; or the making of a recording the main object of the company’s activities.
What is the benefit?
The theatre company will be able to deduct an additional 80% of qualifying production costs from their profits to reduce their profits subject to tax or create a loss that can be surrendered for a cash payment from HMRC. Typically, expenses relating to developing, producing and closing the production would qualify for a deduction. Normal running costs do not qualify.
Touring performances have a higher tax credit than those that are non-touring, touring must be shown at several different locations.
Up to 27 October 2021, a qualifying loss can be surrendered for a payment from HMRC of either 20% or 25% of the loss. As part of the changes the government made to the creative tax reliefs, there was an increase in the rates of theatre tax credits from 27 October 2021 from 25% to 50% for touring productions and 20% to 45% for non-touring. These rates will then decrease to 35% and 30% respectively from 1 April 2023 until 1 April 2024 when the rates will return to their original amounts of 25/20%.
Orchestra Tax Relief (“OTR”)
Orchestra tax relief works in a similar way to theatre tax relief but is aimed at an orchestral production company. A qualifying orchestral company could receive a payment from HMRC equal to a percentage of their production costs to reduce profits or to increase a loss – thus paying less corporation tax.
Who can claim relief?
The orchestral company must be responsible for putting on the concert from start to finish, including employing or engaging the performers. They should be actively engaged in the planning and decision-making of the performance and directly negotiate, contract and pay for rights, goods and services.
What is a qualifying orchestral performance?
Are performed by an orchestra, ensemble, group or band consisting wholly or mainly of instrumentalists who are the primary focus of the concert
The orchestra should consist of a minimum of 12 instrumentalists
All or most of the instruments must not be electronically amplified
Are intended to be performed live for the paying public or for educational purposes
Having at least 25% of core expenditure is on goods or services provided from within the European Economic Area (EEA)
What is the benefit?
The orchestral company will be able to deduct an additional 80% of qualifying production costs from their profits to reduce their profits subject to tax or create a loss that can be surrendered for a cash payment from HMRC.
From 27 October 2021, the rate of payment has increased, from 20% (non-touring productions & exhibitions) and 25% (touring) of the loss surrendered, to 45% and 50% respectively. From April 2023 the rates will reduce to 30% and 35%, before returning to their current 20% and 25% from 1 April 2024.
Museums and Galleries Exhibition Tax Relief (“MGETR”)
Exhibition tax relief is available to museum and gallery charities that operate under a limited company structure. Touring and non-touring exhibitions are both eligible.
Who qualifies for MGETR and what does it apply to?
A qualifying company is a charitable company or a company wholly owned by a charity or local authority which maintains a museum or gallery. Broadly, the qualifying company can either be the primary exhibitor or a secondary venue that hosts the touring exhibition.
If the exhibition is held at numerous venues, the primary company must be responsible for at least the first of those venues. There can only be one primary production company for an exhibition. If the exhibition is held at two or more venues, there may be secondary production companies. A secondary production company must be responsible for producing and running the exhibition at a venue and actively engaged in decision-making in relation to that venue. There may be more than one secondary production company in relation to an exhibition.
What is a qualifying exhibition?
The exhibition should be curated as a public display of an organised collection of objects or works considered to be of scientific, historic, artistic or cultural interest. The core purpose of the exhibition must not be to sell the objects of the exhibition. At least 25% of the core expenditure spent on goods or services that are provided from within the European Economic Area (EEA).
What is the benefit?
The company will be able to deduct an additional 80% of qualifying production costs from their profits to reduce their profits subject to tax or create a loss that can be surrendered for a cash payment from HMRC.
The rate of payment was increased from 27 October 2021, 20% (non-touring productions & exhibitions) and 25% (touring) of the loss surrendered, to 45% and 50% respectively. From April 2023 the rates will reduce to 30% and 35%, before returning to their current 20% and 25% from 1 April 2024.
Television Production Tax Relief (TPTR)
What is TPTR?
TPTR is a tax relief available, subject to specific criteria, for television production companies who produce TV programmes. The relief gives a qualifying company an additional deduction to their taxable profits, reducing the amount of corporation tax payable.
Who qualifies for TPTR and what does it apply to?
For a company to be eligible for TPTR, the programme they’re producing must be viewed as a comedy, drama, or documentary that’s at least 30 minutes long. In addition, the programmes must be confirmed by the British Film Institute as being ‘British’ with the intention to be broadcast to public, whether it be via the TV or an online stream.
In terms of cost, the Government states that at least 10% of the total expenditure, i.e. total production costs, relate to activities solely in the UK. Also, programmes should have a minimum of £1,000,000 per broadcast hour core expenditure.
Expenditure qualifying for enhancement i.e., ‘core expenditure’ includes expenditure incurred on pre-production, principal photography, and post-production. Non-qualifying expenditure include costs relating to development, distribution, and other non-production activities.
What is the benefit?
If a television production company is eligible for TPTR, there is an additional deduction from tax profits for the lower of 80% of total expenditure or the amount of core expenditure incurred in the UK. Additionally, if a company is making a loss, a 25% payable tax credit can be claimed on some or all the loss.
Film Production Tax Relief (FPTR)
What is FPTR?
FPTR is similar to TPTR but, you guessed it, for films. A film production company is the company that makes a film, i.e., at the film’s manufacturing process.
Who qualifies for FPTR and what does it apply to?
There are a couple of similarities between FPTR and TPTR, most notably the British Film Institute needing to confirm it as ‘British’, and at least 10% of the total expenditure relating to activities in the UK. The film in question must also, however, be intended for theatrical release, i.e. it must be available in cinemas for the public.
Similar to TPTR, expenditure qualifying for enhancement i.e. ‘core expenditure’ includes expenditure incurred on, pre-production, principal photography and post-production. In addition to the costs incurred, the company must also be responsible for pre-production, principal photography, post-production, and delivery of the competed film.
What is the benefit?
Again, the benefits are very similar to TPTR with the additional deduction being the lower of 80% of total expenditure or the amount of core expenditure incurred in the UK. If a company is making a loss, a 25% payable tax credit can be claimed on some or all the loss.
Video Games Tax Relief (VGTR)
What is VGTR?
Similarly, video game developers can claim a deduction on their taxable profits if they meet the specific VGTR criteria.
Who qualifies for VGTR and what does it apply to?
VGTR was first introduced in 2013. As above, video game developers must pass a cultural test, managed by the BFI, to be eligible for claiming the relief - with the intention of supplying the game to the public for sale.
In contrast to TPTR and FPTR, at least a 25% of core expenditure must be incurred on goods or services provided from within the UK/EU. For VGTR, ‘core expenditure’ includes expenditure incurred on designing, producing, and testing the game. VGTR cannot be claimed on games that are produced for advertising or promotional purposes or the purposes of gambling.
What is the benefit?
As with TPTR and FPTR, an additional deduction can be claimed to reduce taxable profits or increase a loss. If a loss is generated following the claim, some or all this loss can be surrendered for a payable tax credit of 25%. The deduction will be the lower of 80% of total expenditure or the amount of core expenditure incurred in the UK or EU.
