Monday, 13 February 2017

Bums on seats.

The City AM at its innumerate best:

London’s theatreland will be forced to pay an estimated £31m in property taxes over the next five years once the government’s planned hike in business rates comes into effect in April.

The total rates bill for theatres in the West End will rise by nearly 40 per cent to £6.3m for the 2017 to 2018 year alone, according to figures compiled by City A.M.

They couldn't find anybody from theatre-land stupid enough to complain about this - as a general rule, one group owns the physical theatre building and a quite separate promoter puts on the actual play - so they recycle this rent-a-quote:

The New West End Company, a lobby group for the West End*, has warned that the dramatic tax changes could lead to job losses and reduced investment for the capital’s retailers.

* If you look at the company accounts, you will note that at least half their directors represent landlords, not retailers.

Let's try and put those numbers in perspective, shall we?

From The Stage (figures possibly a little out of date but not wildly wrong):

West End theatres have reported a 12th year of growth at the box office, but attendances to London shows have remained flat.

Overall, there were gross sales of £633 million in 2015, up 1.6% on the previous year, when box office revenue was £623 million. However, the 2015 figures are based on a 52-week year, compared with the 53 weeks in 2014.

In total, there were 14.7 million attendees to West End theatres, roughly the same as in the slightly longer period counted in 2014.

In other words, their Business Rates will be nudged up to about 1% of gross ticket etc sales. The VAT they have to pay is 17% of gross sales, so the Business Rates are nigh irrelevant.

Alternatively, it works out at less than 50p per ticket sold, that's their share of the location rent. The real theatre people know full well that they are getting off lightly here; if they put on an identical play somewhere out of town, they'd struggle to fill the house for an average ticket price of £43. That 50p is what theatre goers are paying extra for the experience/convenience of going to the West End.


mombers said...

How does this compare to the increase in VAT, employers NI, etc?

A terrible frustration with UBR and council tax is that it's paid by the occupier, not the owner. Rates and council tax eventually do their job of driving down rents and hence are effectively paid by the landowner. But people can be whipped up into a frwenzy over the piddling amounts that they write cheques for, even if it really comes out of their landlord's pocket.

Derek said...

The problem is, Mombers, that it only comes out of the landlord's pocket eventually. Unfortunately there is a painful adjustment period during which some tenants will go out of business as part of the rent reduction process. One might almost imagine that it had been designed that way to make small businesses hate UBR as much as commercial landlords do...

Mark Wadsworth said...

M and D, in real life, the actual stage show production company is effectively there under a licence and I doubt they ever pay the rates.

The production company usually has some sort of profit share agreement with the theatre owner, a % of gross sales or a flat daily fee or some such combination. Sometimes the theatre pays all or part of the set up costs and then gets it back as a priority claim on ticket sales.

In this case, it will be the owner of the land and buildings paying the rates. Which is why they couldn't find any real theatre types to moan about this.

So retail tenants face a short term hit when BR go up, theatre production companies could't care less.