The theatre tax relief cashflow puzzle

When I started exploring the funding landscape for theatre it was immediately obvious that Theatre Tax Relief (TTR), introduced by government to support the creation of theatrical productions – from plays and musicals to opera and dance – has been transformative. 

Since its introduction in 2014, TTR has enabled producing companies to stage more ambitious productions, take greater creative risks and connect with wider and more diverse audiences, all of which has helped sustain a dynamic and vibrant theatre industry in the UK.

During the pandemic, the relief was increased in what was described as  a ‘lifeline’ for the theatre sector and a survey by The Society of London Theatre (SOLT) & UK Theatre also helped shape a permanent increase.

From this month, touring productions are entitled to a 45% relief and non-touring shows receive a 40% rebate. TTR therefore remains a hugely significant source of financial support for the sector during these tough times.

Great for the sector, challenging for cash flow

The permanent increased rates have come as a welcome relief – without TTR many theatrical productions would not happen. But the incentive can also cause a cashflow headache as claims can only be submitted to HMRC alongside end-of-year accounts, meaning cash often lands in the bank many months after money is spent on creating and rehearsing the productions.

This delay is more significant with the higher relief rates supporting larger claims and is particularly challenging for the subsidised theatre sector with its already depleted reserves in the current complex operating environment – the cost-of-living crisis, rising costs and lack of funding.

During our research, we found a few commercial finance providers offering TTR cash flow solutions, but most were prohibitively priced, relatively inflexible and/or only available to very large players. To address these challenges, we set out to develop a practical and affordable cashflow solution.

TTR cash flow loans

Our aim at Figurative, an independent not-for-profit launched in 2024, is to spark innovation and attract fresh investment into the UK’s vibrant cultural and creative sector. As part of our social impact investment work, we manage the live Arts & Culture Impact Fund which offers repayable finance to the sector.

The fund’s mandate is to use repayable finance in an innovative fashion to develop the sector’s financial resilience. In this way, it provides an excellent launchpad for our TTR cashflow loans initiative. Our ambition is for the loans to empower theatre producers to focus on bringing joy to their audiences rather than being distracted by short-term cash management.

Applications for our TTR loans, ranging between £100k – £500k, can be submitted in the post-production period (when costs are known) and are specifically open to not-for-profit theatres that clearly demonstrate social impact.

We’ve designed them with affordability in mind, featuring quick turnaround times, low arrangement fees and competitive interest rates, only charged after an HMRC claim is received.

Insights from pilot participants

When we ran a pilot scheme last year, we were encouraged by the enthusiastic response from the organisations involved, including Rambert – the leading contemporary dance company.

Like many production companies, Rambert doesn’t have its own performance venue so cashflow strain can be particularly high. The temporary relief afforded by the loan enabled Rambert to gain certainty about its cashflow for planning purposes. It could then concentrate on strategic and creative matters, including its stage adaptation of Peaky Blinders and its investment in Rambert Grades to work with young people and communities.

Helen Searl, Rambert’s deputy chief executive, said the relief had benefited her organisation, noting “just how critical TTR is to our business model”. She expressed delight at being part of the pilot, which she described as an “innovative lifeline” for the sector.

While our current focus is on theatre and dance, we plan to expand our support to include Orchestra Tax Relief and Museums and Galleries Exhibition Tax Relief in the future.

How to find out more

We’re realistic that our initial £2 million allocation is a drop in the ocean of sector needs, but in the coming months and years, funds will be redeployed, allowing us to support more organisations. We’re also exploring ways to bring in additional capital to expand the venture to meet demand.

I passionately believe in the use of innovative financial models to support creative excellence – exactly what drives our work at Figurative. We hope this initiative will not be just a temporary fix but offer a sustainable model of support for the UK theatre sector.

You can find out more about Figurative’s TTR Cashflow Loan Scheme here.