L-Day: Cultural tax reliefs – Key technical and administrative changes

Changes to key technical and administrative requirements for theatre, orchestra, and museum and gallery tax reliefs

Changes to cultural tax reliefs

As previously announced, the Government will extend the temporary higher rates of theatre, orchestra, and museums and galleries exhibition tax reliefs for two further years from April 2023. However, further changes have been introduced in draft legislation which provide much needed clarification and simplification of certain aspects, as well as the introduction of some anti-avoidance measures. A mandatory online information form will also be required to be submitted with every claim with a view to tackle abuse and improve claim processing.

Extension of temporary rates for theatre (TTR), orchestra (OTR), and museum and gallery (MGETR) tax reliefs

There have been no amendments to the proposed changes to the rates for TTR and MGETR, which will remain at 45 percent (for non-touring productions) and 50 percent (for touring productions) until 31 March 2025. From 1 April 2025, the rates will be 30 percent and 35 percent.

For TTR, the rates will return to 20 percent and 25 percent on 1 April 2026. MGETR will expire after 31 March 2026 and no expenditure after this date will be eligible for relief.

The rates for OTR will remain at 50 percent for expenditure taking place from 1 April 2023, reducing to 35 percent from 1 April 2025 and returning to 25 percent from 1 April 2026.

Online information form

An online information form will be made mandatory for the submission of TTR, OTR and MGETR claims from 1 April 2024 with the intention to streamline the administration and to help tackle abuse of the reliefs. Further guidance on this will be available later in the year.

Restriction to qualifying expenditure

EEA expenditure will no longer be eligible for tax relief for new productions from 1 April 2024. Instead, only UK expenditure will qualify. Furthermore, to qualify for the reliefs, at least 10 percent of the total expenditure must be UK expenditure (rather than at least 25 percent being EEA expenditure under the existing rules).

Connected party profit

The draft legislation introduces an exclusion of expenditure that represents ‘connected party profit’. Therefore, any group recharges will be restricted to the actual underlying costs incurred by the group. This could have a significant impact on certain special purpose vehicle (SPV) structures which are used in the sector. This will have effect for expenditure incurred from 1 April 2024 onwards.

Orchestra Tax Relief – Concert Series elections

There will be a welcome amendment to the time limit for concert series elections to either before the date of the first concert in the series (which mirrors the existing rules) or before the date on which the company first delivers a tax return for a period in relation to which a concert in the series falls, whichever is later.

This will give much more flexibility around the process of making concert series elections, which can now, effectively, be made after the event once full information is known. These changes apply where the first concert in a series is on or after 1 April 2024.

Further clarifications

  • For TTR, it has been clarified that in order to qualify, the primary focus of the play, opera, musical or dramatic piece must be the depiction of a story, or a number of related or unrelated stories, through the playing of roles by performers (whether actors, singers, dancers or others);
  • Productions containing problem solving on the part of the audience will be excluded from TTR;
  • Costs incurred on the provision of incidental goods or services to members of the audience/visitors, will not be eligible for relief;
  • To be eligible, an exhibition will require physical admission for MGETR purposes: and
  • There will be a restriction on claims if the company is no longer a going concern.