TTR50130 - Eligible expenditure: ineligible expenditure: examples

S1217GC Corporation Tax Act 2009

Theatre Tax Relief (TTR) in respect of a separate theatrical trade by a Theatrical Production Company (TPC) is only available on elements of core expenditure (TTR50010).

Completion bond and other forms of insurance

Completion bonds are a form of insurance against the risk that a production may not be completed. Costs of the completion bond do not qualify for TTR. They are not incurred on theatre production activities.

Expenditure on other forms of insurance, more directly concerned with the theatre production activity itself, may qualify. These will be insurance costs that are allowable core expenditure and also European expenditure. So insurance expenditure related to individuals or equipment during the production or closing phases of a theatrical production will be eligible expenditure provided it is also European expenditure.

Development costs

See TTR50120 - these costs are not items of core expenditure.

Running costs

The ordinary running costs incurred on or after the first performance of the production to the paying general public or for education purposes are not core expenditure.

Entertaining

Costs related to hospitality and entertainment are disallowable under normal rules.

Publicity and promotion

Publicity and promotional costs do not qualify for TTR. They are not concerned with the making of the production.

Audit and accountancy fees

Audit fees do not relate to theatrical production activities. They do not qualify for TTR.

Accountancy fees may qualify for TTR if the accounting activities directly relate to producing the production.

Storage costs

Cost of storing costumes or sets etc. do not directly relate to theatrical production activities. They do not qualify for TTR.

Bank interest and charges

While interest itself is regarded as part of the costs of financing a production, and therefore not incurred on theatrical production activities, charges incurred by banks for facilities that are needed by the TPC to engage in theatrical production activities are part of the costs of production. This includes charges associated with the maintenance of a current account from which suppliers, cast and crew can be paid.

Furlough payments, including those met by the Government through the Coronavirus Job Retention Scheme (CJRS)

Expenditure is only included in the separate theatrical trade if it has been incurred by the company on the activities involved in developing, producing, running and closing the production, as per s1217IC(1). To qualify for an additional deduction, expenditure must also meet the definition of ‘core’ in s1217GC: it must be on producing or closing the production.

When a company places an employee on furlough, the employee must cease work. The employee is not carrying out the activities listed above and is not working on producing or closing the production.

Staffing costs in respect of an employee on furlough are therefore not considered by HMRC to be incurred on producing the theatrical production and do not constitute production expenditure. Such payments are not considered to be costs of the separate theatrical trade and are not eligible for tax relief. This applies equally to all furlough payments, whether or not they are reimbursed by the CJRS, and includes any ‘top-up’ element. If an employee has been placed on flexible furlough, then any payment in respect of the furloughed time will not be eligible.

Holiday pay and sick pay are statutory requirements. HMRC considers them to be a necessary cost of employing staff and part of the cost of their working time. Any period during furlough which is taken as annual leave or recorded as sick leave is potentially eligible for relief, and should be apportioned in line with work done.