Operation of relief – how do cultural tax reliefs work?

In practice, the cultural sector reliefs offer an enhanced deduction that can be taken in respect of costs incurred between a project being greenlit and its opening night; and costs incurred in closing the production after the final performance. Eligible expenditure does not include, non-producing activities, ordinary running activities and marketing costs. 

The additional deduction is the lesser of 80% of the total core expenditure or the actual expenditure incurred in the European Economic Area.  

If the project is loss-making after the enhanced deduction, the loss can be surrendered for a tax credit equal to a proportion of the losses surrendered. Charities are also able to claim the tax credits even though their productions and exhibitions are usually exempt from tax. 

There is a cap on the value of the tax credit available for MGETR, of £80k (for non-touring exhibitions) and £100k (for touring exhibitions). This cap does not apply for orchestras and theatrical productions.

Enhancement and extension of cultural tax reliefs

The 2021 Autumn Statement saw the government announce an intention to increase the rate of the cultural reliefs.  

The enhanced rates are a temporary measure, currently anticipated to last two years and five months, beginning 27 October 2021. The relief rates will taper from 1 April 2023 and return to the previous levels from 1 April 2024.  

The increased rates will apply where production activities commence on or after 27 October 2021 and are detailed in the below table.

In addition, MGETR, which was due to expire on 31 March 2022, has been extended for a further two years until 31 March 2024. It is currently uncertain whether this will be extended further in a future budget. However, the cap for MGETR of £80k (for non-touring productions) and £100k (for touring productions) has not been increased. 

The enhancement and extension of the reliefs is welcome news for the sector and will help production companies to develop exhibitions and productions to encourage visitors back to venues.

 This article was featured in our February Vat & tax bulletin, to read the bulletin click here.

How can we help

We have been working with a wide range of arts and culture organisations for many years and understand the nuanced needs of different entities in the sector. You could be missing out on tax credits as a result of one or more of these cultural tax reliefs. Speak to one of our expert tax advisers and we can help guide you through the process to ensure you’re claiming for all that you’re eligible for.

Additionally, you may also be interested in our full review of arts tax reliefs collated in a handy PDF guide.

Funding the arts: tax reliefs

For further guidance or advice, please fill in the form below and one of our experts will be in touch.