What is Orchestra Tax relief? What are the qualifying conditions? What is the rate of relief? 

A freeview 'At a glance' guide to Orchestra Tax relief.

At a glance

  • A Corporation Tax relief for companies that are engaged in the production of live orchestral performances.
  • Tax relief is given in respect of the creative and production costs incurred in producing live orchestral performances or commissioning new musical work. Rehearsal costs are included but performance costs are not.
  • No distinction is made between touring and non-touring performances.
  • Orchestras can group together a series of qualifying performances in one tax relief claim.
  • Orchestra Tax relief has effect from 1 April 2016. 

Qualifying companies can claim either: 

  • An additional tax deduction (the enhancement) of 100% of expenditure, which is the lesser of
    • UK qualifying expenditure or 
    • 80% of total qualifying expenditure, or
  • If after claiming enhanced deduction of expenditure the company makes a loss it may surrender the lower of that loss or the qualifying enhanced expenditure and be repaid a tax credit claim amounting to 25% of the loss. The tax credit increases according to the table below.
  • The maximum relief available per company is €50 million.

Rate tax credit

Relief  Original Rate 27/10/2021 -
31/03/2025
2025-26

1 April 2026
onwards

 Orchestra Tax Relief (OTR)*  25%  50%  35%  25%

*  Finance (No.2) Act 2023 extended the length of the increased rates (introduced by Finance Act 2022) from 2023 to 2025 and from 2024 to 2026.

What's new?

Finance Bill 2023-24

Administrative changes have been made to the creative and cultural tax reliefs.

  • Relief claims will require an online information form to be submitted as part of the claim.
    • The form will be mandatory for all claims including the new audio-visual reliefs.
    • For the new audio-visual reliefs, the form will be mandated from 1 January 2024, in line with the start of the reliefs.
    • For existing reliefs, the form will be mandated from 1 April 2024.
  • Other changes will address anomalies and unforeseen consequences.

See Policy paper: Administrative changes to the creative industry tax reliefs 

There have been some technical clarifications made to the rules for cultural tax reliefs. The changes will:

  • clarify the exclusion of capital expenditure for all the cultural reliefs
  • require apportionment of costs incidental to production for all the cultural reliefs
  • amend the time limit for concert series elections to either the date of the first concert in the series or the date of the OTR claim relating to the first concert in the series, whichever is later

See: Policy paper:Technical clarifications of the rules for cultural tax relief

COVID-19

HMRC have included guidance relating to the impact of furlough payments during the COVID-19 pandemic, including those met by the Government through the Coronavirus Job Retention Scheme (CJRS), at OTR60120.

There are a number of changes from the original proposals and those set out following the consultation process.

Overview

A number of key changes were made to the original consultation document that introduced this relief:

  • The number of players required was reduced from 14 to 12.
  • Originally all four of the main instrument groups needed to be represented. Finance Act 2016 does not refer to any instrument groups but requires that most of the instruments used are not directly or electronically amplified.
  • The original proposals restricted orchestras in terms of the type of music used in the performance, for example, no use of rock or pop music was allowed, but this restriction is not included in the legislation.
  • No distinction is made between touring and static performances.

Definition of an orchestral performance

  • There must be at least twelve instrumentalists.
  • A minority of the instruments can be electronically or directly amplified.
  • Players in the orchestra must be the primary focus of each performance.
  • The performance should be for paying members of the general public or for educational purposes.
  • Each performance must be live with the players actually present before their audience.

Exclusions:

  • The main purpose or one of the main purposes of the performance is to advertise or promote any goods or services.
  • The main object or one of the main objects of the performance is the making of a relevant recording or broadcast.
  • Performances consisting of or including competition or contest.

Where a company claims Orchestra tax relief, it will not be able to claim relief under another tax credit scheme such as Film tax relief, Theatre tax relief or the Research and development tax credit.

Any amount of costs incurred but unpaid within four months of the end of a period of account will not qualify for tax relief for that period.

Qualifying companies

The company must be within the charge to UK Corporation Tax and be the production company for the concert.

This means that the company must:

  • Be directly involved in the development of an orchestra's performance, making effective creative, technical and artistic contributions.
  • Be actively involved in the decision-making process to deliver the performance.
  • Be responsible for employing or engaging the performers.
  • Directly negotiate for, contract for and pay for rights, ­goods and services in relation to the concert.

There can be only one production company in relation to a concert.

HMRC has confirmed that charities will not be excluded from this relief even if they do not pay Corporation Tax: they may claim the repayable credit.

Some orchestras may choose to use a wholly-owned trading subsidiary in order to claim tax relief. 

Qualifying expenditure

The company's expenditure must be directly incurred in the creation and development of an orchestral performance and must be integral to the creative process. 

The list below sets out some examples of eligible and ineligible costs. In addition, the following are excluded from relief:

  • Indirect expenditure, such as the costs of marketing or financing.
  • Speculative expenditure and ordinary running costs.
  • Costs that have also qualified for R&D relief.

Qualifying expenditure can be incurred in any country, although at least 25% of the core expenditure must be incurred in the European Economic Area.

Examples of core expenditure

Qualifying ‘core’ expenditure:

  • Player and artist fees.
  • Rehearsal costs.
  • Venue hire for rehearsals.
  • Hire or commissioning of musical scores.
  • Relevant travel and subsistence within the UK.

Ineligible costs:

  • Performance costs.
  • Cost of financing.
  • Fees, including legal and accounting fees.
  • Administration.
  • Marketing and advertising.
  • Overseas travel and subsistence.

Claiming for a series of concerts

  • There must be two or more orchestral concerts.
  • All, or a high proportion of concerts, must be qualifying orchestral performances.
  • The company must be the production company in relation to every concert in the series.
  • All or a high proportion of concerts must be performed live, either for the paying public or for educational purposes.
  • The EEA expenditure condition must be met in relation to the series.
  • The company must make an election before the date of the first concert to treat the concerts as a series.