HMRC turns theatre relief case into farce

Has nobody told the powers that be in HMRC’s legal department that a) the Revenue is massively under-resourced and b) in the midst of the cost-of-living crisis, HM Government needs to save every penny?

Judging by the highly entertaining but farcical case of a charity subsidiary, Thursford Enterprises Ltd vs HMRC [TC08560], it seems the answer to both of these questions is a resounding “no”.

After putting on what they billed as The Christmas Spectacular in 2017, the producers claimed 20% theatre tax relief under section 1217FA CTA 2009. This was a 2014 provision introduced by George Osborne to “make sure our theatre producers and performing arts can continue to entertain and capture audience’s imaginations”.

Role play

To qualify the performance had to be a theatrical production, in this case a dramatic production defined as “a production of a play, opera, musical, or other dramatic piece” in which “the actors, singers, dancers or other performers are to give their performances wholly or mainly through the playing of roles”.

Generally speaking, this was drafted to be pretty widely interpreted including ballets and circuses but excluding, things such as promotional activities, competitions, anything involving wild animals or productions of a sexual nature (where content was included “solely or principally for the purposes of sexually stimulating any member of the audience”).

Non-stop extravaganza 

Thursford Enterprises’ yuletide production is a major undertaking. This “extravaganza of non-stop singing, dancing, humour, and variety” takes place every year in a purpose-built auditorium. It usually sells out, runs for three hours and consists of 80-86 performances, featuring more than 65 musical pieces and the talents of a cast of over 100.

It would take a veritable Scrooge to deny tax relief to a charity trying to bring joy to thousands of theatregoers from across the country, but that is the role in which HMRC cast itself.

Curtain up

To give a quick flavour of the evening, some of the acts included:

• a solo singer in a flowing white 1940s-style dress and chorus ensemble dressed in top hat and tails, plus high-kicking flamboyantly dressed dancers with feather headdresses, performing a song by Jerome Kern
• John Udry, a juggler, performing to Cactus Polka played on the Wurlitzer organ – he does not speak but engages the audience with a sense of both humour and, to a degree, jeopardy
• 18 male dancers dressed as toy soldiers pretending to play trombones while the orchestra plays Seventy-Six Trombones
• a five-minute Fred Astaire medley
• a flight of doves over the audience as the show closes, symbolising the peace of Christmas.

Story time

HMRC did not seek to allege that The Christmas Spectacular was of a sexual nature. Instead, they first claimed that the performance did not fall within the definition of “other dramatic piece”.

To succeed, they had to prove that the show was outside the statutory definition at the time: “Plays, operas, musicals or other dramatic pieces are theatrical productions if the playing of roles is the whole or major part of what is done by persons performing, each performance is live to an audience before whom the performers are actually present.”

HMRC suggested that they required “evidence of a storyline or narrative which could be clearly followed through the characters”, although the legislation said nothing of the kind.

The appellant’s counsel Patrick Boch sensibly cited Waiting for Godot by Samuel Beckett and Cats by Andrew Lloyd Webber as examples of qualifying productions that lacked a traditional story and also quoted Encyclopaedia Britannica’s definition of a theatrical production.

HMRC took the opposing view, believing that a story was necessary. Its internal litigator Paul Mark contended that pop concerts and stand-up comedians might fall within this wider definition. The tribunal disagreed.

In character

HMRC additionally contended that the performers were not involved in “playing of roles”. They interpreted this as requiring an entertainer to perform “outside normal life”, whatever that means. 

The producers’ counterargument was that “Each performer was playing the role ascribed to them both by reference to the direction received from the script and producer/choreographer in each scene.”

They observed that everyone involved was a professional performer paid to play a role in that none of them was playing themselves. They splendidly elaborated pointing out that “each performer must put on their performance ‘face’, even where they are having a bad day or are stirred by the emotion of the production. However, the singers or dancers feel they must nevertheless smile as a 1950s dancing girl in Vagas (sic), hold a pious expression as chorister etc.”

HMRC’s accepted that in certain scenes performers were playing a role but suggested that in others they were “presenting a skill/being themselves as singers or dancers as there was a lack of continuity and characterisation to justify the performance as the playing of a role.”

Once again, the tribunal disagreed, struggling even to understand HMRC’s position.

Curtain call

HMRC finally contended that if they lost this case, the Royal Variety Performance, pop concerts and karaoke productions would qualify for relief. This argument was also given short shrift primarily because in such cases the individuals would be performing without direct interpretation and therefore as themselves.

With long backlogs of serious cases to resolve, it is unclear why HMRC should have chosen to lose this ill-judged battle. The parties have been granted the right to appeal.

In addition to his onerous work as an accountant, Philip Fisher is London Editor of www.britishtheatreguide.info