With the start of a fresh new year for the arts and culture sector, we thought it would be helpful to reflect on some potentially positive tax developments for those involved in the performing arts sector, with a brief review of the key points of the corporation tax reliefs for theatre and orchestral productions. This is also are area where it is very important that those assisting in this area work together to make sure the various strands of legal, tax and accounting issues are brought together.

Who is eligible?

Theatre tax relief (TTR)

For theatres, the relief is available to production companies that are responsible for the production, running, and closing of a theatrical production (not the wider, indirect running costs running the production company). The production company can be a commercial company but it can also be another organisation such as a charity or a charity's trading subsidiary.

Unlike other the creative industry tax reliefs, there is no cultural test in order to be eligible for TTR.

What is a qualifying 'theatrical production'?

    It must be a live dramatic production, ballet, dance, opera or other live performances, including circuses provided that they do not use wild animals in any performance, or that use trapeze artists, which are regarded as a sport or display of athleticism by HMRC. Also included are any productions that give performances "wholly or mainly through playing a role", and those where the presentation of live performances is the main object, or one of the main objects, of the company's activities in relation to the production.

    What type of production is excluded?

      The following categories of performances are not eligible for TTR:

      • Where the main purpose is to advertise or promote goods or services;
      • those consisting of a competition or contest;
      • where wild animals are used;
      • productions of a sexual nature; or
      • where the making of a recording is the main object or one of the production company's main objects in relation to the performance.

      'Touring' and 'non-touring' productions

      Different rates of relief apply for touring and non-touring productions, with globe trotters receiving a higher rate of relief (which are detailed in the next section).

      The status of a production as a touring or non-touring production is determined at the beginning of the producing phase. To qualify as a touring production, there must be an intention to tour at the beginning of the production stage (that does not subsequently change), and that the production will either perform in:

      • six or more separate premises; or
      • at least two separate premises and the number of performances will be at least fourteen.

      The premises' must be distinct and separate locations. Performing in the basement and then in the hall of the same building for example, is not sufficient.

      For the purposes of establishing an intention to tour, the producing phase is deemed to begin when substantial producing activities commence in relation to the production. This could be some time after the production has been given the initial go ahead.

      But what if plans change and the production does not go on tour? If there was an intention to tour at the beginning of the producing phase but, for reasons outside of its control, finds that it does not present live performances of the production in six or more separate premises or at least two separate premises for a minimum of fourteen performances, it may still qualify for the relief for touring productions. Evidence of the initial intention to tour will need to be provided, for example, contracts, locations and payments for booking premises and each case will be decided on in its own facts.

      Orchestra tax relief (OTR)

      The relief is available for orchestra production companies and will broadly mirror the provisions of TTR in its application.

      What is a qualifying 'orchestral production'?

        It must be a live performance featuring at least twelve musicians representing at least one of several instrument groups, which are strings, woodwind, brass or percussion. The players in the orchestra must be the primary focus of each performance, and playing to paying members of the general public must be the main object or one of the main objects of each performance. It will be possible for orchestras to claim relief if occasional performances include pop and rock music.

        What type of production is excluded?

          • Where most performances are of pop or rock music;
          • the main purpose, or one of the main purposes of the performance is to advertise or promote any goods or services;
          • the main object, or one of the main objects of the performance is the making of a relevant recording or broadcast; or
          • performances consisting of, or including, a competition or contest.

          What are the rates of relief?

          TTR Since 1 September 2014, TTR has allowed theatre production companies to claim additional relief or a payable tax credit on theatrical productions in respect of qualifying production losses.

          It is a per production tax relief, and the claim is made in a corporation tax return.

          Relief is obtained on 80% of the lower of qualifying expenditure and overall available loss on the theatrical production trade. There are two rates of relief:

          20% _ for non-touring productions; and
          25% _ for touring productions.

          HMRC recently published its detailed TTR guidance which is available here.

          It would seem that the government is particularly motivated to support and incentivise live productions to tour (which would otherwise perhaps financially struggle to) and promote the UK's theatre industry regionally, nationally and globally.


          Following the Chancellor's announcement in 2014's Autumn Statement and consultation early 2015, we can expect a similar relief for orchestras to be in operation from 6 April 2016.

          What we do know is that orchestras of all types, sizes and touring habits, will be eligible for OTR at a rate of 25% on qualifying expenditure from 1 April 2016.

          Conditions & what type of expenditure qualifies?


          Only professional theatrical productions qualify. This means that the production company must, at the beginning of the production phase, intend that at least a high proportion of the live performances will be to the paying public for commercial purposes, or will be provided for educational purposes. In addition, at least 25% of the core expenditure incurred by the production company must be incurred within the European Economic Area (EEA).

          Expenditure qualifies if it is incurred by the company for producing, running and closing a production. Expenditure incurred in the ordinary running of the production does not qualify, but a substantial recasting or set redesign mid-performance run may qualify. Non-direct costs such as financing, advertising, professional fees, or storage do not qualify.

          And unlike other creative industry tax reliefs, there is no cultural test in order to be eligible for TTR.


          Draft legislation is expected to be published soon. However, we do know that qualifying companies must be engaged in the development and production of live orchestral performances. OTR will be in respect of the creative and production costs incurred in producing live orchestral performances or commissioning new musical work. Rehearsal costs will also be included but performance costs will not. Unlike TTR, no distinction will be made between touring and non-touring performances.

          Similar to TTR, expenditure qualifies if it is directly incurred in the creation and development of an orchestral performance such as producing, running and closing a production. This includes rehearsal costs and player and artists fees. Indirect expenditure, such as the costs of marketing, financing or overseas travel will not be eligible for relief. In addition, speculative expenditure and ordinary running costs will be excluded from relief. Again, akin to TTR, at least 25% of the core expenditure must be incurred in the EEA.

          Practical and legal matters

          An organisation can still claim the relief even if it does not have a corporation tax liability or if, for example, it is a charity and does not pay corporation tax. In such circumstances, the relief is obtained by means of a cash payment from HMRC (i.e. a credit rather than a relief).

          There are also a couple of additional practical considerations for charities. The first is that charities are unlikely to be preparing and submitting annual corporation tax returns, and these will now be required in order to claim the relief.

          The second point is that charities may need to establish a wholly owned trading subsidiary in order to claim the relief, for example if the charity is established as a trust (the charity must be in the corporation tax regime). The charity would then subcontract the production of the performance to the subsidiary that in turn, will be eligible to claim the relief.

          The subsidiary must be responsible for all key decisions in relation to the production and retain creative control throughout, which leads to careful questions of how directors of the main organisation ensure they retain appropriate control and discharge their (charitable) duties. It is also possible for the subsidiary to subcontract elements of the production to the parent charity, for example, the charity may be able to provide labour or a rehearsal space. That can create the need for contracts within the "group".

          If a subsidiary arrangement is being put in place, it is vital that all legal formalities and agreements are documented and clearly set out the roles and responsibilities of each company. There are also other legal considerations to consider such an employment relationships and the dovetailing of insurance and liability between the charity and any production subsidiary (or even subsidiaries!) used.

          To make sure the opportunity for claiming relief is not missed, we recommend that advice is sought sooner rather than later, particularly as thought may need to be given to restructuring a production organisation to qualify.