OTR60060 - Orchestra Tax Relief: eligible expenditure: UK expenditure
The amount of Orchestra Tax Relief (OTR) to which an orchestral production company is entitled is determined听by the amount of core expenditure which is also UK expenditure.听
UK expenditure is defined as: 鈥榚xpenditure on goods and services which are used or consumed in the United Kingdom鈥�.听
The nationality of those providing the goods and services has no bearing on whether the expenditure qualifies as UK expenditure. The 鈥榰sed or consumed鈥� test does not focus on the supplier of goods and services but instead concentrates on the recipient or customer as the means of determining听UK expenditure.听
In order to听determine听whether an item of expenditure incurred in relation to a听concert or concert series should be treated as UK expenditure, it is necessary to establish:听
the nature of the specific goods or services in question; and听
the place where the recipient uses or consumes those goods and services.听
Rehearsals听
HMRC will consider expenditure on rehearsals held in the UK to be UK expenditure regardless of where the concert or concert series itself is held.听
For example, the cost of hiring a venue in the UK to hold rehearsals for a concert series which will be performed wholly overseas听is UK expenditure.
Musicians鈥� fees听
Fees paid to musicians are based on where their services are performed, not where the musician is resident for tax purposes. Therefore听fees paid for rehearsals in the UK will qualify but fees paid for rehearsals abroad will not.听
If rehearsals听take place partly in the听UK and partly overseas, the fees paid to musicians should be听apportioned on a just and reasonable basis. For example, it would be reasonable to multiply the fee for all rehearsals by听听
the number of rehearsals held听in the UK听梅 the total number of rehearsals for听the concert series听
to give a fee based on the proportion of UK rehearsals. Apportionment could also be done on a time basis 鈥� days spent rehearsing in the UK versus days spent rehearsing overseas, for instance.听
For administrative ease,听the combined total of the fees听paid to all musicians for the concert series can be apportioned using the same basis, rather than calculating the proportion听for each musician individually and adding them together.听However, this should only be done if the proportion does not substantially differ听between musicians.听
Note that musicians鈥� fees paid for performances relate to the running phase of the production and are not core expenditure, regardless of whether the musicians鈥� services are used or consumed in the UK (see OTR60030).
Travel costs听
Travel expenses qualify if part of the journey takes place in the UK. Therefore, they will qualify if the travel is:听
wholly within听the UK听
from the UK to a destination abroad听
to the UK from a destination abroad听
Expenses for travel between destinations outside of the UK will not qualify.听
If a journey is in two legs, only the leg to or from the UK will qualify.听For example, if the journey consists of a flight from Birmingham to Paris, a stopover in Paris, then an onwards flight to Rome, only the leg from Birmingham to Paris is UK expenditure.听
If the journey has been paid for as a single trip, the cost should be apportioned on a just and reasonable basis.听
Travel costs includes both tickets for musicians and other crew and the cost of freight.听
ATA Carnet costs听are allowable.
Accommodation and living expenses听
These kinds of costs are allowable if the musicians and crew are staying somewhere in the UK, but not if they are staying somewhere abroad.
Rights payments听and commission fees听
These types of costs should be apportioned based on where the music is performed, on a just and reasonable basis. For example, apportion could be made by reference to the number听of concerts in each location. If the division is between UK rehearsals and shows overseas, apportionment on a time basis听may also be reasonable.