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HMRC internal manual

Theatre Tax Relief

Qualifying productions: State aid

S1217KC Corporation Tax Act 2009 (CTA 2009)

Theatre Tax Relief (TTR) is a State aid.  A State aid is defined in Article 107(1) Treaty on the Functioning of the European Union as:

‘any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods’. Any such aid ‘shall, in so far as it affects trade between Member States, be incompatible with the internal market.’

The Department for Business, Energy & Industrial Strategy (BEIS) provides further information on State aids.

Any Theatrical Production Company (TPC) must adhere to the rules in the General Block Exemption (GBER) (Commission Regulation (EU) No 651/2014 of 17 June 2014 and amended in 2017) which came into force as of 1 July 2014.  For State aid purposes the total amount of any theatre tax credits for each undertaking must not exceed 75 million euros per year. ‘Undertaking’ must be interpreted within the context of the GBER in force.


State aid intensity and Cumulation

A TPC must consider whether it has received any forms of aid from other sources as these must be ‘cumulated’ to arrive at the intensity figure.

Cumulation means that you must add up any State aid received from more than one source going to the same project (or in this case, theatrical production). Normally, you cannot receive more than one aid payment for the same action.

For example, if you have a notified State aid tax benefit which you use to increase investment in a new theatrical production, you could normally not then claim a grant from another Government Department for work on the same production.

Other forms of State aid may include: grants, direct payments, tax reliefs, tax exemptions, or any aid by a state or through its own resources.  This list is not exhaustive and companies should determine whether any payments, grants etc. they receive are State aids which may need to be taken into account when determining whether the theatrical production has reached an intensity level. The intensity level is the maximum amount of State aid that a project is permitted to receive in relation to the budget, after cumulation from all sources.

Each TPC must ensure that it does not exceed the proscribed State aid intensity levels set out in the GBER in force. Breaching the limit may mean that any aid given in excess of the permissible amount will have to be returned to the organisation or Department granting the aid.

However, a TPC can cumulate aid in two circumstances: under the GBER, and de minimis aid.

Different GBER aids with identifiable eligible costs may be cumulated with:
• any other State aid, as long as those measures concern different identifiable eligible costs
• any other State aid, in relation to the same eligible costs, partly or fully overlapping, only if such cumulation does not result in exceeding the highest aid intensity or aid amount applicable to this aid under GBER.

At the point at which the GBER aid intensity thresholds are broken, the measure that breaks the threshold must be notified and repaid to the organisation or Government Department granting the aid.

GBER Rules on cumulation are at Article 8.

Documentation relating to grants, etc. should normally state whether or not the aid is a State aid. However, where there is any doubt the TPC should seek professional advice or contact BEIS to determine whether they are in receipt of other State aids or have exceeded the permitted aid intensity.


Undertakings in Difficulty

Undertakings in difficulty can only receive a State aid under the restrictive conditions for rescue and restructuring aid. Any other form of State aid received is explicitly excluded, even when other companies that are not in difficulties can receive such aid.

This means that to be eligible for any State aids a company must be trading and a going concern at the time it received the aid.

Undertakings in difficulty are defined in the European Commission Guidelines: Guidelines on State aid for rescuing and restructuring non-financial undertakings in difficulty (2014/C 249/01).

See also the General Block Exemption Regulation, No 651/2014 of 17 June 2014, particularly Article 2.

The 2014 guidelines are lengthy, but these extracts from point 20 of the rescuing and restructuring guidelines define a company in difficulty as follows:

For the purposes of these guidelines, an undertaking is considered to be in difficulty when, without intervention by the State, it will almost certainly be condemned to going out of business in the short or medium term. Therefore, an undertaking is considered to be in difficulty if at least one of the following circumstances occurs:

(a)        In the case of a limited liability company, where more than half of its subscribed share capital has disappeared as a result of accumulated losses. This is the case when deduction of accumulated losses from reserves (and all other elements generally considered as part of the own funds of the company) leads to a negative cumulative amount that exceeds half of the subscribed share capital.

(b)        In the case of a company where at least some members have unlimited liability for the debt of the company, where more than half of its capital as shown in the company accounts has disappeared as a result of accumulated losses.

(c)        Where the undertaking is subject to collective insolvency proceedings or fulfils the criteria under its domestic law for being placed in collective insolvency proceedings at the request of its creditors.

Point 24 of the guidelines states an SME that has been in existence for less than three years will not be considered to be in difficulty unless it meets the condition set out in paragraph 20(c).


As part of State Aid Modernisation measures, the European Commission has created a database to publish information about State aid granted by all Member States.  HMRC is required to populate this database with details of relevant tax reliefs received from 1 July 2016 and above €500,000, which the Commission will then publish.

The actual amount of the State aid will not be published. Instead the name of the recipient will be published alongside one of six broad bands ranging from €0.5 million to €30m or more.

The UK has a legal requirement to provide the information on State aids granted above €0.5m to the European Commission.  HMRC is disclosing this information because there is a specific legal basis to do so. Information about the amount of tax paid by a company, and any other details about the company’s tax affairs, remain confidential.