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HMRC internal manual

VAT Taxable Person Manual

HM Revenue & Customs
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Particular trades: theatre production and management companies

a. General

When a commercial theatrical entertainment is presented to the general public, the company producing the entertainment (the production company) is usually a separate entity from the company owning and/or managing the theatre (the management company). There is normally an agreement between the management and the production company which outlines their respective responsibilities, and provides for their costs/fees to be met from the box office takings. The management company generally retains controls of the box office and produces the weekly accounts, retaining a percentage of the takings, plus certain standard payments for the use of its staff and facilities, and remitting the balance to the production company.

b. Relationship between management, producer and the public

At one time, Customs and Excise took the view that the production company presented the entertainment to the public and that the supply of the use of the theatre to the production company by the management company constituted a grant of a licence to occupy land which was exempt under Group 1.

However, during 1978 discussions took place with the Theatres’ National Committee to determine which body should account for tax on box office takings, and to decide whether or not there was an exempt grant of a licence to occupy the theatre (or part of the theatre) by the theatre management to the production company. The Committee maintained that the facilities granted by the theatre management to the production company were very restricted as regards times of availability and parts of the theatre available. They also drew attention to the level of continuing supervision by the management company’s permanent staff, and the inability of the management company to abdicate or delegate its responsibilities as licensee (from the local authorities under the Theatre Act 1968) for social matters such as the safety of the public and the content of plays.

It has been agreed therefore that the use of part of the theatre by the production company does not constitute an exempt supply by the management to the production company provided that:

  1. the contract is worded to exclude any reference to a specific grant of a licence to occupy theatre space; and
  2. the management company is totally responsible for the box office receipts and accounts for VAT on them.

If these conditions are met, the production company can be treated as supplying its services to the management company who in turn supplies the right to view the performance to the public. The Theatres’ National Committee have informed their members of this agreement, and they expect them to introduce revised contracts to comply with these requirements.

Cases under either of the following headings will have to be considered in the light of the specific circumstances and contracts:

  • arrangements where a management company provides all the necessary facilities for a production company or another body such as local operatic society but takes no further part in the venture (i.e. the management company effectively hires out the theatre) when there may be an exempt supply under Group 1 of Schedule 9; or
  • other places of entertainment such as concert halls, stadia, etc.

c. Previous decisions

Existing decisions given to theatres licensed under the Theatre Act 1968 that exempt licences to occupy have been granted to production companies were not to be disturbed unless the conditions of paragraph b. were met and both the management and the production company asked to follow the new procedure.

d. Policy responsibility

The HQ Branch with policy responsibility for this is VAT Supply Policy Team.