What is orchestra tax relief and how to reclaim up to 20% in tax benefit

Orchestra tax relief (OTR) allows production companies engaged in orchestral concerts to benefit from either a reduction in their corporation tax liability or a repayable credit.

The relief is designed for professional as well as amateur orchestral concerts, to recognise the unique cultural value the performances bring to the UK and encourage greater and more diverse productions.

Who can make a tax relief claim?

To qualify for OTR you must be responsible for all of the following:
  • putting on the orchestral concert from start to finish;
  • employing or engaging performers;
  • actively engaging in decision-making in relation to the concert;
  • making effective creative, technical and artistic contributions to the concert;
  • directly negotiating, contracting and paying for rights, goods and services in relation to the production.
The production company can either be a commercial or charitable company. Although the majority of income in charitable companies is exempt from tax, they are still within the charge to corporation tax, so are eligible for OTR.

The tax benefit

Where an orchestral production company is profitable, the OTR claim reduces its tax liability by up to an additional 15.2% of the qualifying costs.
 
Where a company is loss-making, or doesn’t pay corporation tax (for example, due to prior year losses, or if a charity), a tax credit at a rate of up to 20% of the qualifying costs is repayable to the company.

What orchestral concerts are eligible for tax relief?

An orchestral concert is one which is performed by an orchestra, ensemble, group, or band, consisting wholly or mainly of instrumentalists who are the primary focus of the concert. Relief isn’t dependent on the type of orchestral performance, or how technically able the musicians are.

A qualifying concert must meet the following three conditions:
  • the concert must consist of at least 12 instrumentalists, where the majority of the instruments are not electronically or directly amplified;
  • the primary focus is to play live before the paying public, or for educational purposes;
  • at least 25% of the ‘core expenditure’ on the production must be spent on goods or services that are provided from within the European Economic Area (EEA).
If the concert includes a competition, or if the main purpose of the concert is to record it, or advertise goods or services, it will not be regarded as a qualifying concert for OTR purposes.

What costs can be included in your claim?

Qualifying costs include the core expenditure in producing the concert or concert series and specific travel and subsistence costs.

Certain expenditure is specifically excluded from ‘core expenditure’ for the purposes of the enhanced deduction, including:
  • expenditure on marketing, financing, storage and legal services;
  • speculative expenditure on activities not involved with putting on the concert or concerts;
  • expenditure on the actual performance or performances, for example payments to musicians.
Each concert must be treated as a separate trade. However, a company can elect to treat a series of qualifying orchestral concerts as a single concert, which may help to reduce the administrative burden. Such an election must be made prior to the first concert in the series taking place and should specify all the concerts to be included. Once made, the election is irrevocable and cannot be amended.

How can we help

Our specialist team can assist you to structure your entity to ensure that it qualifies for relief, consider which of your orchestral concerts qualify, identify the costs that are eligible for relief and manage the application process on your behalf.

If you require any advice on the matters noted above, please contact Philip Clark.

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