When Thursford Enterprises put on its Christmas Spectacular show at its picturesque Norfolk venue five years ago it believed it qualified for Theatre Tax Relief. Introduced in 2014, this relief allows companies to reduce their Corporation Tax bill for qualifying productions consisting of “a play, opera, musical or other dramatic piece that tells a story, where the performances are live and the performers give their performances wholly or mainly through the playing of roles”.
But HMRC decided Thursford Enterprises’ Christmas Spectacular show, “set in the magical surroundings of mechanical organs and fairground carousels”, shouldn’t qualify for the relief because it was not a “dramatic piece”. It held that it was more like a variety show where each participant performed as themselves, rather than a cohesive story where everyone played a role. However, after watching a video of the show and hearing extensive evidence, the judge decided to rule against HMRC. In her First Tier Tribunal decision the judge found that “the performance is mainly through singers and dancers playing roles.” Some of the performers, such as the musicians, were not playing roles but as 80 out of 112 cast members were acting out characters, the relief was available, according to the judge.
Ami Jack, tax partner at Evelyn Partners commented: “When this tax relief was introduced in 2014 rules were set as to what should qualify and it defined the notion of a ‘dramatic piece’. The judge ruled in favour of the organisers of the Christmas Spectacular show, but this ruling will make those putting on other shows think carefully about the make-up of their festive productions. After several years of disruption from Covid-19, many companies may not be able survive if they find out at a later date that they don’t qualify for the relief.
“Anyone thinking about claiming the relief on a similar show needs to assess how many of their performers will be playing roles, and if an overall story is conveyed. Though the decision does not define the exact proportion of the performers that need to be acting, the ‘wholly or mainly’ test is a high bar. In the Thursford Enterprises case, the judge noted that pop concerts and karaoke were not theatre or dramatic pieces so were beyond the scope of the relief, and that the Royal Variety Performance would not be eligible for relief as the acts were not connected.”
