Theatrical Tax Relief or dressed up Taxidermy?

NB This post was written pre the consultation document – which you can read here, as well as further clarification from ACE here. The consultation period is very short, and ends on the 8 May ML 1/4/14

Slowly but surely information about the Government’s consultation for a new theatre tax relief scheme targeted at supporting theatres and touring productions across the UK, is starting to emerge.

In announcing it George Osborne (who it was rumoured was more open to Arts Council England and Peter Bazalgette spending round pleas than his colleague Danny Alexander) said:-

‘“The UK has some of the most innovative and exciting theatre companies in the world and is known for its ground breaking productions. I recognise the cultural and economic value that regional theatre brings to the UK economy”

Which is nice to hear from the Treasury, but as this recent info graphic (from ACE) shows it’s not just about the money.

Infographic_V3_12_FIN_V2

All that said does this announcement actually mean anything – other than support for commercial producers.

Details of the scheme were first hinted at in the Autumn statement, and then confirmed in the recent 2014 budget. The tax relief will offer a relief rate of 25 per cent for qualifying touring productions and 20 percent for other qualifying productions. As Simon Tait points out in this article in The Stage, that’s as clear as mud.

First reactions from the subsidised sector (where the majority of my work is) has been muted to say the least. Given that most of us are charities who don’t pay tax, what help is tax relief? In this Stage article from December Adrian Vinken , CEO at Plymouth Theatre Royal said:-

“it’s hard to see who might benefit from the scheme which the chancellor is proposing to explore….Many regional theatres do certainly invest heavily in research and development, the commissioning and the production of new work but, because they operate within an overall subsidised framework, any offer of tax concessions would unfortunately, unless I’m mistaken, be irrelevant and benefit no one”

But things appear to have moved on from that Autumn Statement. So much so that several senior industry people are starting to suggest the scheme has real potential, and poses a major – positive – challenge to the industry. It would seem that ACE, and others, have been lobbying hard to ensure that the tax break might have more wider relevance as their subsequent guidance suggests.

What’s particularly interesting here are perhaps two things – firstly the higher rate of relief for touring productions and secondly the statement (according to ACE) that:-

‘Both publicly funded and commercial productions will benefit, either by offsetting the relief against corporation tax or through a cash credit for the equivalent amount’

But is this just crumbs from the cabinet table? Well the proof is likely to be in the consultation which now follows, but here’s some possible speculative and optimistic outcomes:-

a) Encouraging producing houses and commercial producers to work together at an earlier stage (rather than the traditional model of producer ‘swooping on success’).

b) By making our regional theatres more attractive for partnership and investment from the commercial sector, producers will be encouraged to take (and develop) more work into the regions. It has to be said though the definition of what constitutes a tour will be key here – would a seven week opening run in one venue for example count as a tour?.

c) Most regional theatres already have commercial subsidiaries (often running catering and commercial services). Could future co-productions which bring together several venue partners (like the New Wolsey/Graeae production of Threepenny Opera, or Mercury Theatres Betty Blue Eyes) be delivered through a specific production ‘creative’ trading subsidiary. This is a model that the film industry has used for years but its success here will depend on what ‘cash credits’ are, or if partners can use the relief to offset tax in other, commercial, areas of their business.

d) It’s possible (and this is where companies like Eastern Angles and Windswept might benefit) that it will lead to some inventive and creative partnerships between individual producers or partner organisations (in EA’s case this could be heritage orgs) and charitable ‘subsidised companies’. Younger organisations, like Windswept, who are set up simply as ‘company limited by guarantee’, or indeed Community Interest Companies (an increasingly common model and alternative to charitable and ltd by shares model, and one favoured by social enterprises), might be able to use the scheme to write off their minimal tax liabilities.

e) Finally the scheme might encourage existing charitable ‘subsidised companies’ to capitalise on their own success, creating either on their own or more likely in partnership, trading subsidiary’s to give further life to successful work.

It’s also interesting that this scheme should be announced just as the Creative Industry Finance scheme is about to go national, following pilots in Greater London, Yorkshire and Humber. The scheme offers finance-based services (essentially loans) for projects and products that can deliver economic growth, development and other benefits to businesses, not for profit organisations and enterprises and individuals (including individual artists and creative practitioners) operating within the cultural and creative industries. In theatre producing terms it could be a god send from a cash flow point of view – providing up front cash ahead of box office returns and fees.

Whilst it won’t be applicable to all – taken together (the tax relief and creative industry finance), and with increasing fluidity already occurring between the commercial and subsidised sector – its just possible that this could open up both new partnerships, new opportunities and new models.

But no one is really going to know what might happen until that consultation goes live!

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