A consultation on planned tax breaks for the theatre sector has been launched by the government, which includes proposals on what defines a theatre tour and when a production’s costs would begin to qualify for relief.
The consultation runs until May 8 and follows last week’s Budget, which confirmed that, from September, producers of touring shows will be able to claim up to a 25% tax rebate, with other productions receiving 20%.
In the consultation document, further details of how this scheme will work are provided.
It states that an eligible production company would be one “within the charge of UK corporation tax” and sets out what a production’s qualifying costs would be. The document proposes that, in order to qualify for tax relief, “expenditure must be directly incurred in the theatre production and integral to the production process”.
The government suggests that qualifying expenditure could be incurred in “any country”, but that a qualifying condition would be that at least 25% of a show’s core expenditure relates to spending in the European Economic Area.
It also clarifies that indirect expenditure – such as marketing costs – would not be eligible.
The proposal is that qualifying costs would only start to attract relief once tickets have gone on sale.
However, Anthony Pins, from accountancy firm Nyman Libson Paul said “this area needs to be more tightly defined”.
He added: “Whilst it is intended to exclude speculative costs relating to projects with no end product, it would be harsh to deny relief for what may be significant pre-production costs which do relate to genuine production, simply because tickets have not yet gone on sale. It is possible that the consultation document has simply been poorly worded, but it is a good example of why the drafting of the final legislation is so important.”
Pins also said that, while the proposed tax relief is base on the model currently used in the film industry, there are “significant differences”.
He said there is no “cultural test” to ensure a production is British and added that, because there is no requirement for qualifying expenditure to be made in the UK, “we may well see large overseas tours basing themselves in the UK in order to take advantage of the relief”.
According to the consultation, the government proposes to define a tour as one in which a production is staged for at least 14 performances in two or more licensed premises, or has performances in at least 12 or more different licensed premises.
The consultation also proposes that each production would need to be treated as a “separate trade from any other activities” within a company.
If a company makes more than one production, each one would need to be a separate trade and a company would need to identify the income receivable and expenditure occurred in connection with each of its productions.
The government asks in the consultation whether this would “cause significant administrative burdens” on producers.
In his foreword to the consultation, chancellor George Osborne writes: “I want to make sure our theatre producers and performing arts can continue to entertain and capture audiences’ imaginations, not just in London’s West End but in our regional theatres.”
He added: “Like the other creative sector reliefs our aim is to provide a generous support that encourages investment in a way that ensures the sustainability of our theatre and live performance in the UK.”
The consultation can be accessed here