Orchestra Tax Relief (OTR) was introduced by the Finance Act 2016 to support the orchestra sector and came into force on the 1st April 2016. It is available to companies, including charities, that produce theatrical productions.
The company receives an additional deduction based on the costs of creating each theatrical production. This either reduces the company’s liability to Corporation Tax, or, and this is particularly relevant for charities who are commonly exempt from Corporation Tax, where the additional deduction creates a loss, then the loss can be surrendered to HMRC for a payable tax credit. It applies to orchestra companies that:
- Put on an orchestral concert from start to finish
- Employ or engage performers
- Are actively engaged in decision making
- Directly negotiate contracts
- Pay for rights, goods and services
- Make an effective creative, technical and artistic contribution to the concert
OTR can apply to many types of instrumental group, so don’t be dissuaded from making a claim if you are not part of a traditional orchestra.
If your organisation is a company, a charitable incorporated organisation (CIO or SCIO) or a community interest company (CIC), then it falls under the Corporation Tax regime and can apply for OTR – yes, even if it is a charity and doesn’t currently complete tax returns!
If your organisation is a trust or an unincorporated association, then you cannot claim OTR. That said, there may be good reasons why a change of structure may be beneficial, especially if you are keen to operate within a structure that limits personal liabilities.
An orchestral concert is one which is performed by an orchestra, ensemble, group, or band consisting wholly or mainly of instrumentalists who are the primary focus of the concert. OTR isn’t dependent on the type of orchestral performance, or on the musicians’ technical ability. A qualifying concert must meet the following conditions:
- The concert must consist of at least 12 instrumentalists, the majority of the instruments must not be electronically or directly amplified;
- The primary focus is to play live before paying public, or for educational purposes; and
- At least 25% of the core expenditure on the production must be spent on goods or services that are provided from within the European Economic Area (EEA).
OTR is a fantastic source of additional funding and it is worth checking whether your company qualifies as the amounts claimed can be significant.
For more information contact Graham Suggett, Counterculture’s creative tax expert who can provide more details and advise you on all aspects of the above. Contact Graham at firstname.lastname@example.org.