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HMRC internal manual

Theatre Tax Relief

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HM Revenue & Customs
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Eligible expenditure: leading actors

S1217GB and S1217GC Corporation Tax Act 2009

The amount of Theatre Tax Relief (TTR) to which a Theatrical Production Company (TPC) is entitled in respect of a separate theatrical trade is determined by the amount of core expenditure (TTR50010) that is EEA expenditure.

This can present particular issues in relation to payments for services rendered by principal actors or other key personnel.  In some cases this will primarily relate to their time provided.  But in some cases it might be that the costs could be considered to relate to the promotion of the production.
This issue occurs more obviously with film, but where there is significant merchandise and other commercial exploits attached to the production, this may easily occur.

The facts of each case should be considered carefully, but any apportionment must be made on a fair and reasonable basis.

Actors paid mainly by reference to time

Where payments to actors or other artists are determined mainly by reference to the time spent or committed to the production, it will be reasonable for costs to be apportioned on a time basis.

Costs may need to be apportioned across rehearsals, principal photography and post-production, depending on where these activities take place. In that case, it would be fair and reasonable to apportion on the basis of time spent or committed.

Leading actors whose payment is largely independent of time

Where the amount paid to a famous actor is largely independent of the time spent or committed to working on the production, it is reasonable to regard the actor as primarily being paid for their acting performance.

Some of this fee will be in respect of production rehearsals and this amount will need to be apportioned on a just and reasonable basis.  They may also devote time to promotion and publicity for the production and they may be contractually obliged to do so.

Where large fees are paid that seem disproportionate, it may be reasonable to conclude that some element of the fee is paid for promotional purposes where the actor is contractually required to spend significant time on promotion and publicity for the production.

This might be where their contribution is mainly one of ‘celebrity’ or ‘association’ and is used for commercial exploitation.

Where an actor’s fees include payments for travel and subsistence or any other personal costs incurred during promotion of the production, the additional payment cannot reasonably be included as core expenditure.  It relates primarily to promotion of the production.

If it is in a TPC’s interest to allocate part of the overall fee paid to a principal actor to activities other than those involved in producing or running a theatrical production, HMRC would expect the TPC to undertake the necessary work to establish and agree with HMRC an alternative allocation.

Interaction with Foreign Entertainers Unit (FEU)

The FEU have responsibility for agreeing the taxation of foreign actors appearing in UK productions.

In agreeing the tax position, FEU may allow deductions from their fees for expenses which the actor has incurred.

Deductions allowed have no effect on the amount the TPC can claim as core expenditure. This will remain the gross fee subject to any restrictions for non-EEA expenditure and non-core expenditure.