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HMRC internal manual

Theatre Tax Relief

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HM Revenue & Customs
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Overview and general definitions: meaning of 'theatrical production expenditure', 'core expenditure' and 'phases of theatrical production'

S1217IC, S1217GC Corporation Tax Act 2009

Theatrical production expenditure

Theatrical production expenditure is expenditure incurred by the company on:

  • the activities involved in developing, producing, running and closing the production, or
  • activities with a view to exploiting the production.

Core expenditure

Theatre Tax Relief (TTR) is only available on core expenditure.

Core expenditure is expenditure on activities involved in:

  • producing the production (including exceptional running costs), and
  • closing the production.

Exceptional running costs, such as expenditure in connection with a substantial recasting or a substantial redesign of the set, may be treated as expenditure incurred on activities involved in producing the production if they are incurred on or after the date the production is first performed to the paying general public or provided for educational purposes.

Expenditure on activities involved in the development, ordinary running or exploitation of the production is not core expenditure and does not qualify for TTR.  In addition, expenditure on any matters not directly involved in producing the production is not core expenditure and does not qualify for TTR.

The company may still be able to claim a deduction for this non-core expenditure under normal tax rules.

Phases of theatrical production

Development

Development is the stage of creation of a production in which the project progresses from the initial concept to the point at which a decision can be taken as to whether or not it should proceed to production.

During development all the necessary elements are assembled to enable a producer to make a judgement on whether or not the production is a viable project.

Expenditure on development activities is not core expenditure and will not qualify for TTR if the production does not get ‘green lit’, that is if there is not a firm and definite commitment that the production will go ahead as evidenced, for instance, by ticket sales, hire of theatres, casting etc.  The intention is to separate speculative expenditure on productions which never go ahead from purposive expenditure undertaken in the knowledge that a decision has been taken to proceed with the production.

However, if the production does get ‘green lit’, some expenditure on development may be reclassified as expenditure on producing the production if it directly relates to activities in the later production phase.

Production

The production phase begins once the project has been developed and ‘green lit’ and continues until the start of the first paid public performance.  It is when sets are designed and built and actors rehearse.

Expenditure on activities directly involved in producing the production is core expenditure and qualifies for TTR.

Expenditure on any matters not directly involved in producing the production is not core expenditure and does not qualify for TTR.  For instance, expenditure on raising finance, advertising or marketing a production, legal fees, accountancy fees or storage of sets.

Running

The running phase commences at the start of  the first paid public or educational performance and continues until the end of the last paid public or educational performance.  It is when the production is performed live before the paying general public or provided for educational purposes.

Expenditure on the ordinary running of the production is not core expenditure and does not qualify for TTR.  For example, expenditure on ongoing salaries for cast and crew, theatre costs/rent, maintenance, moving costs, travel and subsistence, administration, direction and production.

However, exceptional expenditure incurred during the running phase may be treated as expenditure on producing the production if it is, for instance, incurred in connection with a substantial recasting or a substantial redesign of the set.

A substantial recasting means that this has a major affect on the production such as the replacement of a leading actor necessitating new rehearsals etc.  A replacement of a minor character or dancer will be an ordinary running expense.  Whether or not something in relation to a production in the running phase is ‘substantial’ will depend on the facts.

Closing

The closing phase happens after the last paid public or educational performance of a production and marks the end of the production.  It is when sets are struck, put into storage, sold or broken up.

Expenditure on closing the production is core expenditure and qualifies for TTR provided it does not include expenditure on activities which would not normally qualify as core expenditure, such as storage costs.