Understanding Eligible Expenses for Theatre Tax Relief | Atek Accounting

Are you claiming all eligible expenses for Theatre Tax Relief?

Theatre Tax Relief (TTR) is a valuable incentive that allows Theatrical Production Companies (TPC) to claim a portion of their qualifying expenditure as a tax credit. If you are looking to claim Theatre Tax Relief, it’s important to know what expenses are allowed under the scheme so you can maximise your claim.

Eligible Core Expenditure for Theatre Tax Relief

Firstly, it’s important to know that the HMRC defines four phases of production and uses these phases to help determine what expenses are eligible. In general, only expenses that are considered part of the Production and the Closing phases can be included.

  1. Development: The speculative phase when you consider whether you will go ahead with a production or not.
  2. Production: This phase normally starts when a production is ‘green-lit’ and ends when the curtain goes up for the first live performance.
  3. Running: The period when performances have started and are being shown to the public.
  4. Closing: The final phase of closing the production and removing the sets.

Key eligible core expenditures that can typically be included in your tax relief claim:

  1. Producing the production:

    • Rehearsal expenses: Costs incurred during rehearsals, including venue hire, equipment, and materials.
    • Cast and crew wages: Salaries and wages for performers, directors, designers, and other production staff directly involved in producing the performance.
    • Set and costume design: Expenses related to the design, construction, and purchase of sets, costumes, and props.

  2. Exceptional running costs:

    • Cast and set: Substantial recasting or a substantial redesign of the set.

  3. Closing the production:

    • Final Phase: Core costs related to the final phase when closing the production
    • Production Sets: The costs at the end of the performance related to when sets are struck, put into storage, sold, or broken up.

Expenses Not Eligible for Theatre Tax Relief

It’s also helpful to recognise the expenses that are not eligible to be included in your claim for Theatre Tax Relief. While the list below is not exhaustive, it gives an idea of some of the costs that you can’t deduct as part of your claim.

  1. Completion bond and other forms of insurance: Completion bonds protect against the risk that a production may not be completed. The costs of a completion bond aren’t eligible for TTR since they aren’t incurred on theatre production activities. Costs related to other forms of insurance, more directly related to the theatre production activity itself, may qualify.
  2. Running costs: Expenses related to the ordinary running of the production on or after the first performance are not considered core expenditures.  Some “exceptional running costs” may qualify.
  3. Entertaining: Hospitality and entertainment costs are not allowed under normal rules.
  4. Publicity and promotion: Marketing-related costs do not qualify for TTR since they do not relate to the making of the production.
  5. Audit and accountancy fees: You can’t deduct audit fees. Accountancy fees may qualify for TTR if the accounting activities directly relate to producing the production.
  6. Storage costs: Expenditure related to storing costumes, sets, or other material does not qualify.
  7. Bank interest and charges: Generally, bank interest is not eligible; however, some bank charges may qualify if they are incurred from activities directly tied to the costs of production.

Accounting for the Expenses

Importantly, you must have a reliable process for identifying and tracking your expenses accurately. At Atek, we work with our clients to set up an effective and efficient accounting approach to capture the costs that qualify. The rules are very specific and relate not only to types of expenses, but also at what phase of the production they are incurred and whether the cost is considered a UK/European expenditure.

To claim Theatre Tax Relief, the information is included as part of the theatre production company’s corporation tax return. When filing, you must also prepare and provide separate profit and loss accounts for each production. Done correctly, Theatre Tax Relief can have a significant impact on the financial viability of theatrical productions. It can reduce your tax liability, lowering your overall corporation tax burden; improve your cash flow, providing a cash credit to support ongoing and future productions; and help encourage innovation, enabling you to invest more in creative projects.

Maximise Your Theatre Tax Relief with Atek

If you are not claiming this relief, we can help you determine if you qualify. We will work with you to optimise your claim and ensure you are compliant. The criteria are very specific but can have a significant impact on your financials if you are able to claim. Over 20,000 businesses have claimed since the inception in 2014. For more information, see our Quick Guide to Theatre Tax Relief and contact us for more detailed guidance.

At Atek, we have a passion for helping Performing Arts businesses succeed. We can help you Forecast financials to determine the profitability of a potential project; budget effectively for day-to-day costs while planning future projects; ensure you are tax-efficient and not overpaying; and develop investor packs to help secure funding. We make it easy to get started with Atek, whether you’ve reached the stage of needing an accountant for the first time or you are looking to switch from your current accountant.

Keep reading: Atek’s Quick Guide to Theatre Tax Relief >