Creative sector tax reliefs and Covid-19
With theatres and museums now open, thoughts are turning to the impact of Covid-19 on the availability of Theatre Tax Relief (TTR) and Museum and Galleries Exhibition Tax Relief (MGETR). We have set out below some of the hot topics we have been discussing with our not for profit clients.
Please note, in all cases, advice should be taken to confirm how the rules apply to your specific circumstances.
Theatre tax reliefs
One of the conditions for TTR is that the presentation of live performances is the main object, or one of the main objects, of the company’s activities in relation to the performance. HMRC state:
At the beginning of the producing phase a company must intend that all or a high proportion of the performances of the production will be live. A performance is ‘live’ if it is to an audience before whom the performers are actually present.
Due to Covid, some productions were either postponed or cancelled all together. Where a production was cancelled it would be treated as being “abandoned”. In such cases TTR can still be claimed, subject to the normal rules, up to the point where a decision was made that there would be no live performances of the production.
Recorded productions – could they qualify for a relief?
Some theatres either live streamed productions or filmed them for viewers to watch in their own time. Is there any relief available?
In short, if the original intention was that the production would be performed in front of a live audience, but then wasn’t (perhaps it was live streamed instead), then the production would be treated as an “abandoned production”. This means that expenditure up to the point where the intention changed, and the recording became the main object, would still be eligible under the normal rules. However, any expenditure after that point would not be eligible for TTR.
Could it be eligible for Film Tax Relief instead? The answer is: probably not. One of the conditions for Film Tax Relief is that the film is intended for “Theatrical Release”. This means the intention must have been that the film would be shown to the paying public at the commercial cinema.
What if a tour was disrupted?
The rate of TTR is 20% for touring productions and 25% for non touring production, with normally 80% of expenditure qualifying, this means the effect rate of relief if either 16% or 20%.
If the original intention was that a production would go on tour, and this planned tour met the requirements of being a “touring production” for the purposes of TTR, if the plan changed due to unforeseen circumstances such as Covid then this may not affect the production’s status as “touring”.
Museum and galleries exhibition tax relief
Like theatres, museums were forced to close in 2020 due to Covid. Some exhibitions were postponed or cancelled all together. Similar to TTR, under the MGETR rules only exhibitions which are intended for public display qualify for relief. However, again, there are “abandonment” provisions in relation to cancelled exhibitions i.e. relief can still be claimed for qualifying production expenditure up to the point a decision was made to cancel the exhibition.
What if a touring exhibition was disrupted?
Similar to TTR, should a tour of an exhibition have been disrupted by Covid then this may not affect the exhibition’s status as “touring”.
The end of MGETR?
The MGETR legislation is currently written so that claims can only be made in relation to qualifying expenditure up to 31 March 2022. There fore there is a possibility that museums are in their last accounting period for MGETR.
The government has promised to review the MGETR legislation.
We are hopeful that MGETR will be extended, however, there has been no recent update from the government or HMRC on this topic.