Arts Council England has welcomed a new scheme for arts and cultural organisations to claim specific tax relief on production costs, announced in Chancellor George Osborne’s budget on 19 March. The tax break will apply to both commercial and subsidised productions and will include theatre, ballet, dance and opera, musicals and other live performance.
There are to be two rates of relief: 25% for touring productions and 20% for all other productions.
The scheme is currently in consultation, with the Treasury, HMRC, the Society of London Theatre, UK Theatre, an industry working group and Arts Council England all working on the proposed detailed design. Their conclusions were due to be published on 24 March on the ACE website and elsewhere and legislation should take effect from September 2014.
Arts Council England urges arts groups to study and respond to the consultation. It released a statement explaining the process: ‘Under this new relief, a production company will be able to claim tax relief on costs on a per-production basis. This relief will be at two different rates: at 25% for touring productions and 20% for others from September 2014. The calculation of this is as a percentage of eligible capitalised expenditure (broadly one takes the capitalisation of the project, and the eligible portion comprises most categories excluding marketing and advertising, running costs, contingencies and any finance costs). The tax relief is then applied to 80% of this eligible expenditure. The mechanism for claiming the relief will be covered in the forthcoming consultation.
‘Both publicly funded and commercial productions will benefit, either by offsetting the relief against corporation tax or through a cash credit for the equivalent amount. We have been working hard to ensure that this will work for productions mounted by all sorts of organisations, including those in the “subsidised” sector. This relief is separate from other forms of funding currently awarded to the arts sector.
‘The majority of theatre companies that receive funding from Arts Council England are charities and are not usually liable for corporation tax. It is envisaged that in order to benefit from the tax relief a charity will create a trading subsidiary that is liable for corporation tax through which it will make the production and benefit from any relief. There will be guidance from HMRC in due course.’
The Arts Council will support a training programme for the industry which will be delivered by SOLT and UK Theatre in conjunction with the HMRC, once the consultation has concluded.
The new scheme has been broadly welcomed by the Society of London Theatre, UK Theatre and commercial producers.