Policy paper

Explanatory note (accessible version)

Updated 22 November 2023

Clause 1: Technical clarifications to the cultural tax reliefs

Summary

1. Schedule 1 introduces changes to the cultural tax reliefs: Theatre Tax Relief (TTR), Orchestra Tax Relief (OTR), and Museums and Galleries Exhibition Tax Relief (MGETR). These changes are intended to make the policy intent of the reliefs clearer and bring greater certainty to industry. They will have effect from 1 April 2024.

Details of the Schedule

Schedule 1: Part 6: Theatrical productions

2. Paragraph 26 amends section 1217FA of Corporation Tax Act 2009 (CTA 2009). This amendment alters the meaning of a theatrical production so that the primary focus of the play, opera, musical or dramatic piece must be the depiction of a story or stories. The story or stories must be depicted through performers playing roles. The main purpose of audience members will be to observe a performance rather than participate in it.

3. Paragraph 27 specifies that the provision of incidental goods or services to the audience will not qualify as core expenditure. An example of expenditure on incidental goods or services is where a production serves food or drink to the audience while they watch the show. These types of costs may still be included as part of the company’s separate theatrical trade where they meet the criteria set out in section 1217IC, but they will not be eligible for relief.

4. Paragraph 28 amends section 1217IC of CTA 2009 (‘costs of theatrical production’) to insert a reference to the general rule in CTA 2009 that prohibits capital expenditure as a deduction when calculating the profits of a trade. This is intended to emphasise that in most cases, capital expenditure is not allowed in a company’s TTR claim.

5. Section 1217IC(3) is only intended to permit capital expenditure if it is capital in nature only because it is incurred on the creation of the production itself (e.g. the play, ballet etc.). Examples of permitted expenditure may include costs incurred on developing intangible assets for the production, such as a score. Expenditure that would be capital expenditure regardless of whether it was incurred on the creation of another asset does not fall within section 1217IC(3) e.g. costs incurred on purchasing or permanently modifying land or a building. This same rule applies for capital income deemed as revenue income.

Schedule 1: Part 7: Orchestral concerts

6. Paragraph 35 amends the time limit in section 1217QA of CTA 2009 for making an election to treat orchestral concerts as a series. From 1 April 2024, the time limit is whichever is the later date of:

• the date of the first concert in the series, or
• the date of submission of the first company tax return for a period in which a concert in the series is accounted for as a separate trade

7. Paragraph 36 specifies that the provision of incidental goods or services to the audience will not qualify as core expenditure. An example of expenditure on incidental goods or services is where a production serves food or drink to the audience while they watch the concert. These types of costs may still be included as part of the company’s separate orchestral trade where they meet the criteria set out in section 1217QD, but they will not be eligible for relief.

8. Paragraph 37 amends section 1217QD of CTA 2009 (‘costs of orchestral concert’) to insert a reference to the general rule in CTA 2009 that prohibits capital expenditure as a deduction when calculating the profits of a trade. This is intended to emphasise that in most cases, capital expenditure is not allowed in a company’s OTR claim.

9. Section 1217QD(3) is only intended to permit capital expenditure if it is capital in nature only because it is incurred on the creation of the concert itself. Examples of permitted expenditure may include costs incurred on developing intangible assets for the production, such as a score. Expenditure that would be capital expenditure regardless of whether it was incurred on the creation of another asset does not fall within subsection 1217QD(3) e.g. costs incurred on purchasing or permanently modifying land or a building. This same rule applies for capital income deemed as revenue income.

Schedule 1: Part 8: Museum and gallery exhibitions

10. Paragraph 44 amends section 1218ZAA of CTA 2009 to provide that admittance to an exhibition must be in person to a physical venue where objects or works are displayed.

11. Paragraph 45 specifies that the provision of incidental goods or services to exhibition attendees will not qualify as core expenditure. An example of expenditure on incidental goods or services is where customers are served food or drink as part of the exhibition. These types of costs may still be included as part of the company’s separate exhibition trade where they meet the criteria set out in section 1218ZBC, but they will not be eligible for relief.

Background note

12. At Spring Budget 2023, the government extended the temporary higher rates of relief for two further years for the three cultural reliefs: Theatre Tax Relief, Orchestra Tax Relief and Museums and Galleries Exhibition Tax Relief. The changes seek to make the legislation clearer and reinforce the original policy intent whilst ensuring the fairness and success of the cultural tax reliefs.

13. If you have any questions about this change, or comments on the legislation, please contact Stephanie Martinez and Alice Williams at: stephanie.martinez@hmrc.gov.uk and alice.williams1@hmrc.gov.uk.