Whilst taxes are generally viewed as a necessary business expense, once in a while a new relief comes along which is the exception to the rule. The new Theatre Tax Relief is expected to cost, not generate, the Treasury money.
The relief does have some pitfalls to be aware of, but the government’s aim is to support live theatre productions which should be viewed in a positive light for the industry as a whole. The Treasury is predicting this benefit will be worth up to £15 million annually and comes at a time when public funding is being cut, so it is critical that opportunities to make claims are correctly identified.
These claims then need to be maximised within the framework of the scheme whilst not innocently inflating a claim which may attract unwelcome attention from H M Revenue and Customs.
The Government consultation process earlier this year attracted a large number of well thought out responses. This has led to draft legislation which has tried to encompass a wide variety of live performances at virtually any venue.
There are expected restrictions as to the nature of the performances, mainly to prevent the Government from being seen as supporting productions which may be deemed not to be socially acceptable. One further restriction prevents a claim where the main objective is to make a recording which ensures that television productions are not able to benefit.
As a theatre producer, the knowledge that a production will attract a cash payment from HMRC in relation to the qualifying costs is a valuable piece of information. Whoever is responsible for the finances of the production needs to be aware of a potential claim before the first cost is incurred so the claim can be effectively built up as invoices are received and categorised as qualifying or non-qualifying.
The claim can only be made by a limited company, which may not be the current trading vehicle of the production. The decision may have to made as to whether to transfer the trade to a limited company or accept that the value of the cash refund is insufficient to warrant the change.
Once this decision has been made, it should be re-evaluated at regular intervals to ensure that it is still valid.
Nicola Edmondson is Tax Manager for Tait Walker, a firm of accountants providing a wide range of business and financial services to a variety of clients including those in the production of live performances. Contact Nicola Edmondson ([email protected]) or Alastair Wilson ([email protected])