Orchestra Tax Relief: Could your organisation be eligible?

Orchestra Tax Relief (OTR) is one of eight creative industry tax reliefs and is crucial for supporting the finances of eligible orchestras. The descriptor ‘tax relief’ can be a bit of a red herring for orchestras running as charitable organisations. Charities are not generally within the scope of corporation tax but for OTR, the lack of a corporation tax bill does not itself preclude eligibility.

Essential criteria:

1. Check the legal status of your organisation: OTR can be claimed by a limited company – i.e. Charitable Companies and Community Interest Companies (CICs) but trusts and unincorporated associations will not qualify.
2. Your organisation must be primarily involved in performing live orchestral music. This is defined as making an ‘effective creative, technical, and artistic contribution to the concert’. It will exclude an ‘orchestra for hire’ scenario because you are unlikely to be involved in the artistic decision-making on that concert.
3. The performances must include a minimum number of 12 musicians, the majority of whose instruments must not be electronically amplified. This pushes the relief in the direction of classical music concerts as opposed to rock or pop.
4. The concert is intended to be performed live to paying members of the public or for educational purposes. Live streaming or digital broadcast is acceptable as long as the main object of the event is the performance by the orchestra. Covid caused a bit of havoc here but some concerts which were intended as live performances but ended up being digitally broadcast can still be included.
5. Concerts for the purposes of making a recording are excluded, as are competitions.
6. Each concert is considered a separate orchestral trade, unless you elect to have a series of concerts treated as a single concert. This election is irrevocable and must be completed before the first concert in the series. So, an assessment of the likely outcome of each concert individually, relative to aggregating the results is critical.
7. Of your core costs, 25 per cent must be generated from within the UK or European Economic Area (EEA). From 1 April 2024, there is an additional requirement that 10 per cent of core costs must be related to activities within the UK. For the purposes of this article, we are going to assume that your organisation derives at least 80 per cent of its core costs from within the UK.

Define your core costs

The relief is given by an additional deduction on core expenditure of a concert or series. Core expenditure includes all the costs of producing the concert. Examples include:

• Player and artist fees
• Rehearsal costs
• Venue hire for rehearsals
• Hire or commissioning of music scores
• Relevant travel and expenses within the UK when the travel is to a venue other than the organisation’s usual performance venue

It is equally important to understand what a core cost is not: the cost of the performance itself. The eligible core costs are the costs of putting on a concert up to the point of performance. The practical application here is to apportion player fees to the rehearsals (an eligible element) and the concert itself (ineligible).

There is no official definition of ineligible costs but marketing and advertising; legal and accountancy fees and overseas travel and subsistence are specifically mentioned. We know these kinds of costs are fundamental to the production of orchestral concerts, but they are outside the scope of a core cost for the purposes of OTR.

Enhance your core costs with an additional deduction

Where costs are derived in the UK, the additional deduction will be 80 per cent of the core costs outlined above. This additional deduction will have the effect of reducing your taxable profits if you are a commercial and profit-making venture. If the additional deduction has the effect of creating or increasing a loss in your company, some or all of the loss can be surrendered for a payable Orchestra Tax Credit (OTC) – i.e. a cash refund!

It is this latter scenario I want to flag for orchestras which are set up as charitable companies or CIC’s. Many of these organisations do not think of themselves as being within the scope of corporation tax reliefs, but you can still surrender the loss made on your orchestral concert and receive an OTC, though you will need to submit a corporation tax return in order to make the claim.

What are the current rates?

The relief rate is 50 per cent until 31 March 2025, then will be 45 per cent from 1 April 2025. The deadline for applying for OTR is 2 years from the end of the accounting period in which the concert or series took place, though it is sometimes possible to backdate claims even further.

The new Additional Form requirement

The OTR claim is made via the corporation tax return with additional details being supplied on a new additional form, introduced on 1 April 2024. The additional form must be submitted online, using your organisation’s government gateway login credentials. It will ask for details of the orchestra concert, series or tour – production start dates, concert dates, number of performances and venues etc.

You will then be asked to provide details of the total expenditure for the concert, the total core costs, the additional deduction, surrenderable amount and the amount of orchestra tax relief credit you are claiming.

Finally, keep in mind that you must submit this form and all supporting evidence either before or on the same day you submit your corporation tax return, so have everything ready to go together.

For further help and guidance on Orchestra Tax Relief claims, Sinéad Pratschke is the founder of Musicians’ Tax Advisor which supports musicians and music-adjacent businesses with industry-specific tax and accountancy advice.