OTR60120 - Orchestra Tax Relief: eligible expenditure: non-core expenditure

S1217RC Corporation Tax Act 2009

Orchestra Tax Relief (OTR) in respect of a separate orchestral trade by an Orchestral Production Company (OPC) is only available on elements of core expenditure (OTR60010).

Not all expenditure is core expenditure. Some elements of expenditure will not be core expenditure because they relate to the performance itself.

Expenditure on advertising a concert or series is not production expenditure and is therefore not core expenditure and will not qualify for OTR. This would include the costs of producing promotional material for the concerts.

Expenditure incurred on activities not directly involved in producing the concert or series production, for instance finance, legal or storage costs, will still be included in the taxable profits and losses of the production. It is simply not eligible for OTR.

Furlough payments, including those met by the Government through the Coronavirus Job Retention Scheme (CJRS)

Expenditure is only included in the separate orchestral trade if it has been incurred by the company on the activities involved in developing or putting on the concert or concert series, as per s1217QD(1). To qualify for an additional deduction, expenditure must also meet the definition of ‘core’ in s1217RC(1): it must be on producing the concert or concert series.

When a company places an employee on furlough, the employee must cease work. The employee is not carrying out the activities listed above and is not working on producing the concert.

Staffing costs in respect of an employee on furlough are therefore not considered by HMRC to be incurred on producing the concert and do not constitute production expenditure. Such payments are not considered to be costs of the separate theatrical trade and are not eligible for tax relief. This applies equally to all furlough payments, whether or not they are reimbursed by the CJRS, and includes any ‘top-up’ element. If an employee has been placed on flexible furlough, then any payment in respect of the furloughed time will not be eligible.

Holiday pay and sick pay are statutory requirements. HMRC considers them to be a necessary cost of employing staff and part of the cost of their working time. Any period during furlough which is taken as annual leave or recorded as sick leave is potentially eligible for relief, and should be apportioned in line with work done.