Exhibition Tax Relief and the ‘Production Phase’ – HMRC Guidance released

Guidance in relation to the temporary increase in tax credits introduced by Autumn Budget 2021

HMRC have provided guidance on the commencement of the ‘production phase’ in the context of Museums and Galleries Exhibition Tax Relief, helping clarify whether a production is potentially in scope of the rate uplift introduced by Autumn Budget 2021.  

Production Phase

The production phase involves all the activities necessary to turn the developed idea for a production into an actual museum exhibition that is ready to be displayed to the public. Such activities may include, but are not limited to: production team meetings, venue preparation, exhibit hire. The production phase is broadly defined for the tax reliefs and includes activities often referred to as pre-production.

The production phase begins when the project has been ‘green lit’ – this is when there is a definite commitment to going ahead. Any expenditure incurred prior to this would be part of the development phase, which is where a project progresses from the initial concept to the point at which a decision can be taken as to whether or not it proceeds as a production/exhibition.

There is some blurring between development and production. While a venue might be booked or performers contracted far in advance, this does not necessarily signify that the production phase has started if nothing else has happened to give certainty to the project. Ticket sales are also not necessarily indicative that a project will go ahead or that the production phase has commenced.

The separate trade commences at the earliest of either the start of the production phase, or the first receipt of any income from the production. If expenditure on the production is incurred prior to the start of the trade, the pre-trading expenditure may be transferred to the trade and treated as incurred on the date the trade commences. The commencement of the trade does not necessarily indicate that the production phase has also commenced.

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