Theatres and banks

May 13, 2014

I should probably mention that, of the two consultations that closed last week, I responded to the one on Theatre tax relief, but not to the one on A bank levy banding approach.

Why one and not the other?

Well, I know a bit more about the theatre than I do about banks, for one thing.  But actually the consultations had a lot in common from my point of view, looking purely at the consultation mechanism and at the processes of tax policy making.  Both seem to me to make a complex system even more complicated and for little benefit that I can see.  On the banking one, I felt I had nothing substantive to add except the thought that, turning a rate that depends on your capital levels into a rate that depends on which level of a five stage banding level you fall into, simply cries out for people to spend their energies gaming the system.  And, frankly, if the brilliant minds at the Treasury need a blogger pointing that out to them, well, we’re all in much more trouble than we thought we were!

On the theatre one, well, I’m in two minds about it.  I took my drama degree in the seventies and as far as I’m concerned Peter Brook  is a god and you can tell what’s wrong with the funding of British theatre by the fact that he’s been working in France for the last twenty years.  I believe in subsidised theatre, not instead of but in competition with the commercial theatre, in the way that the BBC’s competition with the commercial and subscription television services keeps the UK playing in the big leagues.  So if you want someone to bore for England on the merits of theatre subsidy and the idiocy of giving tax relief to “high end television” but not to theatre, well, I’m probably your woman.

But actually, the policy is a mess.  It’s on the same lines as the film, tv and computer game tax relief, which is fine, and yes of course theatre should have it too, if it’s there to be had.  It’s just that with theatre I question whether a messy and complicated tax relief that will be of more use to commercial companies, that will require financial engineering (or at least the setting up of dedicated company vehicles) for many subsidised theatres to use at all, and which will privilege touring productions of West End hits over the development or maintenance of regional companies, is the best use of £20-odd million a year.  Me, I’d just give it to Peter Brook and beg him to come back.

If you’re still interested, what I actually sent in response is here under the cut.

This is the response of an individual and will also be published in due course (with commentary) on my blog http://tiintax.com. I have answered your questions in the format they appear in the consultation document, although you will see I have also omitted some questions where I have nothing to add.

Chapter 2: Criteria for theatre tax relief
Question 1: Do you agree with the proposed criteria for assessing options to provide support to the theatre sector? Please provide any comments as appropriate?

This is the one that puzzles me. I’m not at all clear why you are proposing to encourage touring as a criterion for the success of the policy. Surely what would be more helpful would be to encourage the creation or development of vibrant local theatre companies (with continuity of employment for actors, directors and writers) rather than to encourage regional theatres to fill their stages with touring productions. I would exclude the encouragement of touring as a specific policy objective and replace it with an objective to encourage the development and continuation of diverse local regional companies.

Chapter 3: Theatre tax relief
Question 2: Would adopting the definition of theatre production as outlined be an effective way of meeting the government’s objectives set out in Chapter 1?


Question 4: Is this the most appropriate way to exclude sexual entertainment? If not, what solutions do you propose to exclude this from the relief?

If google has pointed me in the right direction, the definition you’re adopting to exclude “sexual entertainment” reads:
Meaning of “sex establishment”
In this Schedule “sex establishment” means a sex cinema or a sex shop.

and the Local Government (Miscellaneous Provisions) Act 1982 then goes on to define both “sex cinema” and “sex shop”. The two things that I’m not clear on are whether these definitions also exclude pole dancing and striptease shows – I would not be in favour of this type of production receiving a tax break but I am not clear whether the definition you are referencing excludes them. Presumably there is case law? If it clearly excludes pole dancing etc then I’m content – and if it doesn’t, you probably need to think again.

Question 5: Is there an alternative definition of ‘touring’ that would more accurately reflect the nature of these types of productions? If so, please provide suggestions.

I cannot see why touring productions should receive a greater tax relief than static productions and I would therefore be against the inclusion of this element into the relief. It also mitigates against a simpler tax system – one of the government’s overarching tax policy objectives. Finally, as I understand it, there are frequently cases where successful productions are later adapted for touring; it would then add to the administrative burden of production companies if they have to allocate expenses between static and touring versions of the same production. For these reasons personally I’d drop this element of the plan.


Question 9: Are there alternative rules that would be simpler or more effective to ensure that speculative expenditure and ongoing running costs do not qualify for relief?

Why are “ongoing running costs” excluded from the relief, please? Personally I would include the employment costs (but not self-employed payments) to actors, directors and other theatre technical staff in the relief. Including only those costs incurred under contracts of employment would support the creation or continuation of continuous regional production companies which, as in my comments in answer to question 1, appears to me a better targeted use of the relief than the encouragement of touring productions.

Question 10: Does the requirement to be incorporated and operate separate trades within the company cause significant administrative burdens for theatre producers? Please explain in what way.
It will cause significant admin burdens to subsidised theatre companies, which tend to be run as charities or other non profits – I imagine they will set up commercial company subsidiaries in order to claim the relief, which seems a non-productive expense. Personally I’d just give them a bigger grant!

Question 11: Are there any other specific design points which need to be addressed? and
Question 16: Are there specific areas in addition to those mentioned, that create the opportunity for abuse?

I question whether “tickets first go on sale” is as decisive a dividing line between “speculative” and “production” costs as shown in Box 3.D. Imagine I raise the capital to start a theatre company from friends and family. I then sell tickets to our Christmas 2018 extravaganza, pay production wages to my cast and crew (who are, coincidentally, my friends and family) and claim the tax credit. I then cancel the production and repay all the ticket purchasers (there were only three, as I didn’t allocate any advertising budget) and put the company into liquidation. Oh, and pay the shareholders a dividend from the tax credit. I’m not sure that works as a “scheme” but you see what I mean? Selling tickets is easy – producing a play is hard!
Annex B: tax impact assessment?
Question 17: Do you have any comments or evidence to further support the impacts identified, particularly our assessment of the impact of these proposals on administrative burdens?

This is the point where I get very annoyed. This whole palaver is expected to cost the exchequer a total of £20m a year, steady state, after 2016. To put this in context, the government provides grant in aid funding via the Arts Council of £1.3m to Sheffield theatres http://www.artscouncil.org.uk/funding/browse-regularly-funded-organisations/npo/sheffield-theatres/ and £16m to the RSC, http://www.rsc.org.uk/about-us/our-work/funding.aspx just to use two examples I know a bit about.

My point is that (1) 20m is peanuts, comparatively speaking, but it could provide us with another regional and another national theatre company, sensibly invested rather than spread thin amongst privately funded commercial theatre companies. But also (2) the idea that the administrative burden will be “negligible” is nonsense, assuming your definition of “negligible” remains “smaller than £100,000, across the entire affected population”. Subsidised theatres are normally charities rather than limited companies so will have to set up production companies to claim back the credit (accountancy firms have already started advertising their services http://www.harbottle.com/theatre-tax-relief-subsidised-sector/ ) and it seems unlikely that the admin burden will be “negligible” by anyone’s standard.

If you’ve got £21m to give to the industry, personally I’d rather see it go into one new company rather than faff about complexifying the tax code. However I appreciate you won’t do that, and so the proposed relief is, just about, better than nothing.

Sorry not to be able to drum up any more enthusiasm!

Kind regards
Wendy Bradley

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