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A theatrical production company may claim an additional deduction in respect of qualifying expenditure¹. The effect of the additional deduction is to increase the level of expenditure for tax purposes. This may decrease the taxable profit of the separate theatrical trade and therefore the amount of corporation tax which would otherwise be payable. It may also create or increase a loss in the separate theatrical trade, some or all of which may be available to surrender for a theatre tax credit. For these purposes, 'qualifying expenditure' refers to core expenditure (D7.1276)² that would normally be taken into account³ in calculating the profit or loss of the separate theatrical trade for tax purposes.

Expenditure which has already had relief under the merged R&D scheme from 1 April 2024, or as an R&D expenditure credit (RDEC)⁴ or the enhanced revenue deduction for SMEs⁵ (see D1.401 for a summary of these reliefs) is excluded from the definition of qualifying expenditure for theatrical relief⁶.

Also excluded is connected party profit ie profit