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Theatre tax relief pays back £25m in first year

Neville's Island was the first West End production to make use of new tax relief rules. Photo: Tristram Kenton Neville's Island was the first West End production to make use of new tax relief rules. Photo: Tristram Kenton
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Theatre companies across the UK will have benefited from an estimated £25 million of tax relief in the first full year of a government scheme for the sector, according to figures published by HM Revenue & Customs.

The estimates are the first figures released for the theatre tax relief, which was introduced in September 2014 following similar schemes for film, high-end TV drama and animation.

HMRC approximated that following the introduction of the scheme, the industry benefited from £5 million during the remainder of 2014/15, and £25 million in 2015/16.

Culture minister Ed Vaizey told The Stage that tax credits were already having an impact on the industry and encouraging producers to make more shows.

He said: “I am sure it will continue to grow in impact, and in a few years will be seen as an essential part of theatre’s funding ecology. But I would also emphasise, emphatically, that it is not a substitute for core public funding, which we will continue to maintain.”

Arts Council England’s grant-in-aid funding allocation from the government totalled £310 million for 2015/16.

The tax relief measures mean touring theatre shows are eligible to claim 25% tax relief on qualifying production costs, while other professional productions can claim back 20%.

Society of London Theatre and UK Theatre chief executive Julian Bird said that, despite still being in its infancy, the scheme’s impact was promising.

“We, and HMRC, have always firmly expected the amount being claimed to grow in the next couple of years. We fully expect year two to be bigger than in year one. We are very encouraged – it’s money into the industry that wasn’t there before,” he said.

Bird added that the scheme had taken time to “settle down”, particularly for smaller companies and for not-for-profit organisations.

These sentiments were echoed by English Touring Theatre director Rachel Tackley, who said many organisations were still waiting for initial claims to go through.

Producers were able to begin claiming for the tax credits from September 1, 2014, with West End show Neville’s Island becoming the first to reap the rewards in December of the same year.

Charlotte Jones, chief executive of the Independent Theatre Council – which represents independent theatremakers – expressed concern that the process was causing some difficulty for small-scale companies in comparison with larger, more wealthy producers.

“It has been set up in such a way that you can only really make your claim via an accountant, which costs money, and we see that as quite an issue for small companies,” she said.

“But some companies have managed to do whole extra productions on the basis of theatre tax relief, which is absolutely what the government is going for. In our view it has definitely made people feel a bit more confident about mounting new productions,” Jones added.

Touring organisation Northumberland Theatre Company is one of the organisations to have benefited from the tax relief, producing two additional shows in 2015.

The company’s finance manager, Karen Hirst, told The Stage: “It’s absolutely terrific. It has enabled us to do shows that frankly I’m not entirely certain would have happened otherwise.”

In December 2015, US Congress passed tax law changes that will see Broadway theatre producers benefit from a tax relief scheme for the first time.

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