TTR50080 - Eligible expenditure: UK expenditure
The amount of Theatre Tax Relief (TTR) to which a theatrical 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 theatrical production 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 theatrical production itself is held.
Any sets, props and costumes used in those rehearsals would also be UK expenditure.
Royalties and similar fees
Royalties and fees follow the same principle. Expenditure will qualify for relief to the extent that production activities such as rehearsals take place in the UK.
NB: royalties paid to actors or other staff who contribute to both core activities and non-core activities should be apportioned to exclude any amounts which are not core expenditure (promotional activities, for example). This matches the treatment of ‘ordinary’ fees paid to these parties e.g. wages (TTR50115).
Fees paid to actors, crew and other staff
Fees paid to staff are based on where their services are performed, not where they are resident for tax purposes. Therefore fees paid for production activities in the UK will qualify but fees paid for production activities abroad will not. Where production activities are split between the UK and overseas, fees paid should be apportioned on a just and reasonable basis.
Take actors’ fees for rehearsals as an 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
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 staff can be apportioned using the same basis, rather than calculating the proportion for each person individually and adding them together. However, this should only be done if the proportion does not substantially differ between staff.
Note that actors’ fees paid for performances relate to the running phase of the production and are not core expenditure, regardless of whether the actors’ services are used or consumed in the UK (see TTR50115).