Example 1 (additional deduction)

A company put on a non-touring production of Peter Pan.  It receives income from the production of £3m (after deducting non-core expenditure) and has total core expenditure of £1.5m (all EEA expenditure).  Without Theatre Tax Relief, the company would be liable to pay Corporation Tax of £285k (19% x £1.5m profit).

Expenditure on the production is eligible for Theatre Tax Relief.  The company is entitled to an additional deduction of £1.2m (80% x £1.5m total core expenditure) in computing its taxable profits from this production, which reduces the taxable profit to £0.3m.

The additional deduction claimed under Theatre Tax relief reduces the Corporation Tax liability to £57k (19% x £0.3m), therefore the benefit of the Theatre Tax Relief claim is £228k (£285k-£57k).

In this example, the Theatre Tax Relief is worth 15.2% of the total core expenditure on the production.

 

Example 2 (loss-making)

A company put on a touring production of Oliver.  Income from the production is £450k (after deducting non-core expenditure).  The total core expenditure is £500k (i.e. qualifying costs incurred in the production and closing phases), all of which is EEA expenditure.

The loss from the production, before Theatre Tax Relief, is therefore £50k (£450k – £500k).

The surrenderable loss is the lesser of:

  • The £450k trading loss after Theatre Tax Relief (£50k loss less 80% of £500k), and
  • The £400k additional deduction (£500k x 80%)

The company can surrender up to £400k of losses.

The company is therefore eligible for a repayable tax credit of up to £100k (25%

Theatre Tax Credit for touring productions x £400k loss surrendered).

In this example, the Theatre Tax Credit is equal to 20% of the total core expenditure.

 

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