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Not all production costs qualify for Theatre Tax Relief. Discover HMRC's rules on core costs, connected parties, and running expenditure.
Understanding which costs qualify for Theatre Tax Relief is crucial, because getting it wrong means leaving money on the table or, worst case, facing an HMRC enquiry.
The answer isn't as simple as "all production costs". TTR has specific rules about what qualifies, when it qualifies, and where the expenditure must be located.
You can only claim TTR on core costs, i.e., expenditure directly related to producing or closing your theatrical production (or in exceptional circumstances, running costs).
Your claim is limited to the lower of:
For example:
Company A spent £200k on a production and £150k was UK-based core expenditure. It can claim the full £150k of its UK core costs because it's less than 80% of the total.
However, Company B spent £200k on UK core costs, so its claim is capped at £160k, which is 80% of £200k.
Whether you can claim UK or EEA costs depends on your accounting period – more on this below.
Your costs need to be incurred by the production company to be eligible. Group structures should be carefully thought out to ensure that all costs are properly captured. At Myriad, we recommend companies set up a Special Purpose Vehicle (SPV) per production and run all costs through this vehicle. This ensures your costs are properly documented and that you receive your tax credit as soon as possible.
The location of your expenditure determines what you can claim.
Only the costs of producing the show matter; the actual location of the final show does not impact eligibility. A production that tours exclusively in the EU will still be eligible if the company and production meets the eligibility requirements and the production costs are incurred in the UK or EEA (see below).
You can only claim for UK expenditure, which are goods and services used or consumed in the United Kingdom.
Workers must be physically based in the UK when performing their services. This applies regardless of their nationality, where your company is based, or whether they're part of a group company.
If someone spends time both inside and outside the UK, you'll need to apportion their costs on a "just and reasonable basis".
UK expenditure is still eligible, even if the production actually runs outside of the UK.
You can only claim for European expenditure, which are goods and services provided from within the UK or European Economic Area (EEA).
The same rules apply; workers must be physically based in the UK or EEA, and mixed-location costs must be apportioned appropriately.
Goods are considered to be expenditure of the zone they are bought from, irrespective of where they are used and consumed. Services can be included if they are used and consumed in the EEA or UK (depending on the accounting period rules above).
For example:
Company C used script provision services in development and production, of which 90% of the cost falls into the production phase. Half of the production took place in the UK and the other half out of the UK. Only 50% of this phase can be included, i.e., half of the 90% deemed core expenditure, or 45%.
Production costs transform your idea into a theatrical production ready for performance. This phase begins when your production is "green-lit" and ends when the curtain goes up for the first live performance.
Eligible production costs include:
Development costs (i.e., any costs prior to the decision to proceed with the production formally) are ineligible.
For more information on the different phases of production, check out our blog: Can You Claim Development Costs for Theatre Tax Relief?
Running costs don't qualify for TTR. The running phase begins with the first curtains-up and ends with the last live performance.
Standard running costs may include:
However, exceptional running costs can qualify if they involve substantial reworking of the production. A major recasting or complete redesign of the set would qualify. Replacing a minor character or routine maintenance wouldn't.
Unfortunately, fees for advance ticket sales won’t qualify, as these are related to the commercialisation of the production and do not directly help produce the show.
You must still include running costs in your calculations for taxable profits and losses, even though they don't qualify for the additional deduction.
Closing costs qualify for TTR. This involves striking sets, putting them into storage, selling them, or breaking them up after your production's final performance. However, this must be separated from commercialisation or exploitation of the production.
Some expenses will naturally cross development, production and running phases. Your director might be involved from initial concept through to closing night. Your scriptwriter may revise the script throughout.
You'll need to apportion these costs on a "just and reasonable basis". HMRC accepts several methodologies.
For key personnel, you might split fees based on time spent in each phase. If your producer spent 2 months on development, 8 months on production, and 2 months on running, you could claim 67% of their fees (8 months out of 12).
For a scriptwriter, you might exclude the initial script as development expenditure but include fees for revisions made during production.
Several costs are explicitly ineligible for TTR, even if they're essential to your production's success.
You can't claim for:
These costs don't contribute directly to producing the theatrical production itself.
Expenditure on the rights to use a story or book as the foundation for your theatrical production qualifies as production expenditure.
However, costs related to broader rights that aren't necessary for production don't qualify. Generally, purchasing an option over the right to use a book would be speculative (and therefore ineligible), whilst costs for exercising the rights to make the production is core expenditure.
The same applies to music, songs, literary works and any other intellectual property incorporated into your production.
It’s important to note that costs are only eligible when they’re in the production phase. Any ongoing costs following opening are no longer eligible.
When you incur costs through transactions with connected parties, those costs must exclude the connected party's profit, unless the transaction is priced at arm's length.
You're connected to another company if:
You must disclose all connected party transactions to HMRC through the Additional Information Form. This disclosure should include the connected party's name, the transaction date, the value included in your claim, and a description of goods or services provided.
For example:
Company D pays £50k to a connected set design company that makes £10k profit on the transaction. It can only claim on £40k unless they can demonstrate the £50k represents an arm's length price.
Yes. TTR isn't considered State Aid, so there's no restriction on claiming for grant-funded productions.
However, if you're claiming for another tax relief work within your theatrical production (e.g., the Audio-Visual Expenditure Credit, or R&D tax credits), you can't claim TTR on the same expenditure. You can claim both reliefs in the same accounting period, but not on the same costs.
You need sufficient evidence to support your claimed costs and demonstrate you meet the qualifying criteria. This is critical in the event that HMRC asks any follow up questions about your claim or, worst case, opens an enquiry into it.
Keep hold of:
HMRC compliance checks have increased across tax reliefs. Strong record-keeping from the start protects your claim.
Your calculations will also need to be airtight. For more information on calculating your Theatre Tax Relief claim, check out our blog: How to Calculate Creative Tax Reliefs.
Getting your Theatre Tax Relief costs right means claiming your full entitlement whilst staying HMRC-compliant. Thorough documentation from day one protects your claim if HMRC comes knocking.
Whether you handle TTR claims in-house or with a consultant, these guidelines will keep you on track. If you'd like us to review your production costs, get in touch.
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Please contact us to discuss how working with Myriad can maximise and secure R&D funding opportunities for your business.
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