Theatre Tax Relief – the current position
The Finance Act 2014 received royal assent on 17 July which means that the Theatre Tax Relief is now law but there are still crucial questions that remain unanswered.
1 September 2014 is key in that after this date qualifying expenditure can count towards a claim for TTR so organisations have been putting off signing contracts until this time. It is worth checking the provisions in the Act that determine when expenditure is actually incurred for the purposes of TTR – for instance advance payments are not counted until the work is carried out.
The key moment will be when HMRC publish their detailed guidance on TTR. TTR is based on Film Tax Relief and there is a detailed company manual published by HMRC which answers many questions. The same is expected for TTR in September or possibly October. There may be industry expectation as to how to approach making an application but it is only HMRC’s view that carries weight as it is HMRC who will determine the qualification and amount of any claim.
In the meantime key points to consider when you undertake productions that may qualify:
- It is expected that subsidised companies will able to make an application themselves rather than needing to set up a subsidiary. This is the most crucial question that needs immediate clarification. The original industry assumption was that subsidiaries would be needed and this created concerns about the administrative burden and added complication. Commercial producers are expected to use subsidiaries as this better fits their producing model.
- If a subsidised company believes that, on a calculation of the income and expenditure of the production in question, the production may make a profit then a subsidiary may be the better option. However assuming grants and donations (ie funding not derived from the individual production) do not count then it is difficult to see how subsidised productions could make a profit on this calculation no matter how successful.
- The standard subsidised/commercial producer coproduction model may need to be adjusted – ie where a theatre puts on a show and retains the box office on the basis that a commercial producer tours the production and pays a royalty/fee/share of profits. TTR states that for each production there can be only one production company which is the company most involved in making the decisions for the production. So can you treat the show at the theatre as one production and the tour as a separate production? This is unclear and the wording of the Act suggests not. If this is the case co-productions using this approach may need to be restructured.
Applications are made by the ‘production companies’ at the end of their accounting period – for most subsidised companies this will be 31 March. So the key during this period of uncertainty is to be cautious now and, if possible, wait until the HMRC guidance is published before setting up productions which may be closer to where the TTR line will be drawn.
I hope this helps clarify some of the immediate issues.
Sean Egan Consultants Limited
email@example.com / 07879 228221
26 August 2014
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