On 26 June 2014 HM Treasury released the first draft of the detailed legislation for the proposed Theatre Tax Relief (TTR), as an amendment to the Finance Bill, together with explanatory notes. These can be found here.
As anticipated the wording largely follows the legislation already in place governing Film Tax Relief, modified to try to cater for the peculiarities of accounting for theatrical productions.
It should be noted that the legislation is subject to changes which are likely to be made as the Bill progresses through the Committee stages and the Houses, so the final enacted version may look quite different in some sections.
We are pleased to note that many of the concerns expressed in our own response to the Consultation have been addressed in the draft legislation. The Treasury’s formal response to the Consultation can be found here.
The draft legislation provides the legal definition as to what will constitute a “theatrical production” – essentially a play, opera, musical, ballet or other dramatic piece, where performers are mainly playing roles, in front of a live audience. It specifically includes a circus, but not if a wild animal appears!
Only one company can be “the production company”, and it will qualify for the relief if it intends its performances to be made to a paying audience, or for educational purposes, and that at least 25% of the core production expenditure is incurred in the EEA. Therefore, as expected, it opens the door to pan-European tours choosing to base themselves in the UK.
The definitions of what will constitute core production expenditure are not very detailed, and largely follow the ideas floated in the consultation document. We await the HMRC guidance notes, due to be published in August, for more precise detail.
The definition of a “tour” has changed since the original consultation paper – it will now cover any production which is performed in at least 6 separate premises, or at least 14 performances in two separate premises. On this basis a brief pre West End run in the provinces will allow a production to take advantage of the higher rate of relief.
As expected subsidised production companies will be able to access the relief, if necessary via the use of a trading subsidiary.
We will follow the development of the legislation with interest, and comment further in due course.
If you have not already done so, please register your interest in regular updates on this topic by following the link here. As previously announced we will be running workshops on the new TTR in the Autumn.