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Tax Relief May Prove Taxing for West End

Chancellor George Osborne (right) managed to stun many in the theatre industry by announcing significant tax breaks on theatre productions in last we.... In a move that begins to address concerns about cuts to the national arts budget, tax relief of 25% will be available to touring productions, and 20% to non-touring productions.


The percentages apply to 80% of the 'eligible' upfront costs of staging the production, and exclude such items as advertising, financing costs, contingencies and running costs. There will be further consultations on the process before its intended rollout in September this year. Both subsidised and commercial theatre will be eligible to benefit, with the relief returned to the producer either through corporation tax or as a cash payment. The corporation tax link means trusts (as opposed to charitable bodies) will likely need to set up commercial trading arms to benefit from the new legislation.


This is obviously a boost to the industry, putting it on a similar footing to the support seen by the UK film industry in recent years. Rachel Tackley, president of the UK Theatre Association told The Stage, "This will have a serious positive impact on production budgets. Commercial theatres will be able to compete with cinema and film producers in terms of getting investors and the not-for-profit sector – if they set up properly – will basically be able to get a cheque in the post."


Heritage repairs

Receiving houses - despite hopefully benefitting from the higher production budgets - will not see any direct cash from the move, though, which won't make it any easier for them to invest in their properties. It was revealed yesterday that although the final report is not yet complete, City of Westminster staff investigating the partial ceiling collapse at the Apollo Theatre have written to West End Theatres advising them that "The principal cause [of the plasterwork collapse] was the deterioration over time of wadding ties which supported the ceiling, thought to be in place since its construction in 1901.�?


If this, therefore, is the principal cause (and not rainwater ingress following a torrential downpour as many speculated) then further investigation and repair work may be required in many venues, although many will have had more secure fastenings inserted since their construction. Mhora Samuel, Director of The Theatres Trust, the national advisory body for theatres, said
“Theatres are constructed in very, many, different ways and use different materials and methods to fix plasterwork ceilings to their roof trusses. The important question is whether plaster-coated hessian wadding is the only material being used to hold up a ceiling as many have also been strengthened with the use of steel ties."


The Trust's 2003 Act Now! report into the state of West End theatres estimated that, at 2003 prices, £250m needed to be spent to bring them up to an acceptable standard. Looking at George Osborne's theatre tax relief plan, consultancy Deloitte estimates it could save theatres nationally £15m a year. Given that it is predominantly producers and producing houses, rather than receiving venues - as most West End Theatres are - that will benefit, the West End may still struggle to afford upgrades.


VAT zero-rating

With the state of theatre fabric under the microscope again, there are other measures that may assist in the tricky balancing required when theatres must be closed to allow for structurally difficult artisan-level heritage repairs, such as zero-rating of VAT for improvements on such buildings. Such a campaign exists in the domestic building sector, and is supported by the Theatres Trust. Concerns exist here that such tax-breaks are used in this area to make alterations and improvements, rather than for restoration, although this would be less of an issue, and more easily regulated, in the West End.


There is some good news for the theatres in the West End. The Budget did announce the raising of the level of the Annual Investment Allowance from £250,000 to £500,000 1st April 2014 to 31st December 2015, potentially allowing plant and machinery infrastructure investment to happen sooner rather than later with the AIA's 100% tax relief. With the new financial year only days away, though, most theatres will have finalised a lot of proposed expenditure already, and have artistic programmes booked and in place.


With discussions yet to be completed on the theatre tax relief programme, it remains to be seen what stimulus it will provide, and whether it will lead to the lowering of ticket prices or a genuine increase in available production budgets, but what is certain is that  investment in building fabric will be as hard as ever.


This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License

Pictures: Main, flickr user foshie others, HM Government, Theatres Trust

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Tags: building operations news, finance, heritage, london news, theatre performance news, uk news

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