OTR60060 - Orchestra Tax Relief: eligible expenditure: UK expenditure
The amount of Orchestra Tax Relief (OTR) to which an orchestral production company is entitled is determined by the amount of core expenditure which is also UK expenditure.
UK expenditure is defined as: ‘expenditure on goods and services which are used or consumed in the United Kingdom’.
The nationality of those providing the goods and services has no bearing on whether the expenditure qualifies as UK expenditure. The ‘used or consumed’ test does not focus on the supplier of goods and services but instead concentrates on the recipient or customer as the means of determining UK expenditure.
In order to determine whether an item of expenditure incurred in relation to a concert or concert series should be treated as UK expenditure, it is necessary to establish:
the nature of the specific goods or services in question; and
the place where the recipient uses or consumes those goods and services.
Rehearsals
HMRC will consider expenditure on rehearsals held in the UK to be UK expenditure regardless of where the concert or concert series itself is held.
For example, the cost of hiring a venue in the UK to hold rehearsals for a concert series which will be performed wholly overseas is UK expenditure.
Musicians’ fees
Fees paid to musicians are based on where their services are performed, not where the musician is resident for tax purposes. Therefore fees paid for rehearsals in the UK will qualify but fees paid for rehearsals abroad will not.
If rehearsals take place partly in the UK and partly overseas, the fees paid to musicians should be apportioned on a just and reasonable basis. For example, it would be reasonable to multiply the fee for all rehearsals by
the number of rehearsals held in the UK ÷ the total number of rehearsals for the concert series
to give a fee based on the proportion of UK rehearsals. Apportionment could also be done on a time basis – days spent rehearsing in the UK versus days spent rehearsing overseas, for instance.
For administrative ease, the combined total of the fees paid to all musicians for the concert series can be apportioned using the same basis, rather than calculating the proportion for each musician individually and adding them together. However, this should only be done if the proportion does not substantially differ between musicians.
Note that musicians’ fees paid for performances relate to the running phase of the production and are not core expenditure, regardless of whether the musicians’ services are used or consumed in the UK (see OTR60030).
Travel costs
Travel expenses qualify if part of the journey takes place in the UK. Therefore, they will qualify if the travel is:
wholly within the UK
from the UK to a destination abroad
to the UK from a destination abroad
Expenses for travel between destinations outside of the UK will not qualify.
If a journey is in two legs, only the leg to or from the UK will qualify. For example, if the journey consists of a flight from Birmingham to Paris, a stopover in Paris, then an onwards flight to Rome, only the leg from Birmingham to Paris is UK expenditure.
If the journey has been paid for as a single trip, the cost should be apportioned on a just and reasonable basis.
Travel costs includes both tickets for musicians and other crew and the cost of freight.
ATA Carnet costs are allowable.
Accommodation and living expenses
These kinds of costs are allowable if the musicians and crew are staying somewhere in the UK, but not if they are staying somewhere abroad.
Rights payments and commission fees
These types of costs should be apportioned based on where the music is performed, on a just and reasonable basis. For example, apportion could be made by reference to the number of concerts in each location. If the division is between UK rehearsals and shows overseas, apportionment on a time basis may also be reasonable.