“Schedule 4 Rental Payments

Advertising revenue

1

(1)

The advertising revenue of a programme contractor for an accounting periodshall be computed in accordance with this paragraph.

(2)

Advertising revenue shall consist of the payments received or to bereceived by the programme contractor in consideration of the insertion ofadvertisements in programmes provided by the programme contractor andbroadcast in the United Kingdom by the Authority.

(3)

In the application of this Schedule in relation to the additional paymentsmentioned in section 32(1)(b), the advertising revenue of a programmecontractor other than a teletext contractor who is not a TV programmecontractor includes payments received or to be received by him inconsideration of the insertion of programmes consisting of advertisementsprovided by him for broadcasting on the Fourth Channel and so broadcast.

(4)

If, in connection with the insertion of advertisements which are paid forby payments constituting advertising revenue, any payments are made to theprogramme contractor to meet any additional payments, those payments shall beregarded as made in consideration of the insertion of the advertisements inquestion.

(5)

In the case of an advertisement inserted in a programme under arrangementsmade between a programme contractor and a person acting as advertising agent,the amount of any receipt by the programme contractor which represents apayment by the advertiser from which the advertising agent has deducted anyamount by way of commission shall, except in a case falling withinsub-paragraph (6), be the amount of the payment by the advertiser after thededuction of the commission.

(6)

If the amount deducted by way of commission as mentioned in sub-paragraph(5) exceeds 15 per cent. of the payment by the advertiser, the amount of thereceipt shall be the amount of that payment less 15 per cent.

(7)

Any contract shall provide that where for any insertion of anadvertisement a programme contractor receives or is entitled to an entireconsideration not solely referable to that insertion, the advertising revenueshall be calculated by reference to so much only of the consideration as isreferable to that insertion according to an apportionment made in such manneras the contract may provide.

Profits

2

(1)

The profits of a programme contractor for an accounting period shall becomputed in accordance with this paragraph.

(2)

The profits shall consist of the excess of relevant income over relevantexpenditure.

(3)

“Relevant income” means—

(a)

in relation to a programme contractor other than a DBS programmecontractor or a DBS teletext contractor, income which accrues to thecontractor in connection (directly or indirectly) with—

(i)

the provision by the contractor of programmes for broadcasting on ITV, theFourth Channel or a local sound broadcasting service, or

(ii)

the provision by the contractor, for broadcasting, distribution or showingin the United Kingdom, of programmes provided by him for broadcasting on ITV,the Fourth Channel or a local sound broadcasting service;

(b)

in relation to a DBS programme contractor or DBS teletext contractor,income which accrues to the contractor in connection (directly or indirectly)with—

(i)

the provision by the contractor to the Authority, in accordance with theterms of his contract as a DBS programme contractor or (as the case may be)DBS teletext contractor, of programmes for broadcasting in the Authority’s DBSservice to which his contract with the Authority relates, or

(ii)

the provision by the contractor, for broadcasting, distribution or showingin the United Kingdom, of programmes broadcast in the Authority’s DBS service.

(4)

Without prejudice to the generality of sub-paragraph (3), “relevant income” includes—

(a)

all revenue which is advertising revenue for the purposes of thisparagraph; and

(b)

such part of any income which—

(i)

accrues to any subsidiary of or company related to the programmecontractor or to the contractor’s holding company, and

(ii)

would be relevant income of that contractor if he and the subsidiary orrelated company or his holding company were a single programme contractor,

as, in the opinion of the Authority, should be attributed to thecontractor as reflecting his financial interest in the subsidiary or therespective financial interests of the holding company in the contractor andthe company related to the contractor or the financial interest of the holdingcompany in the contractor, as the case may be.

(5)

For the purposes of this paragraph advertising revenue includes—

(a)

in relation to a DBS programme contractor, payments received or to bereceived by him in respect of charges made for the reception of programmesprovided by him and broadcast in a DBS service;

(b)

in relation to a teletext contractor, payments received or to be receivedby him in respect of charges made for the reception of programmes provided byhim and broadcast in a DBS or additional teletext service.

(6)

“Relevant expenditure” means any expenditure of the programmecontractor which is properly chargeable to revenue account and which isincurred in connection with the provision by him of programmes of a kindmentioned in sub-paragraph (3).

(7)

Without prejudice to the generality of sub-paragraph (6), “relevant expenditure” includes—

(a)

expenditure in connection with the sale of rights to insert advertisementsin programmes; and

(b)

such part of any expenditure which—

(i)

is incurred by any subsidiary of or company related to the programmecontractor or by the contractor’s holding company, and

(ii)

would be relevant expenditure of that contractor if he and the subsidiaryor related company or his holding company were a single programme contractor,

as, in the opinion of the Authority, should be attributed to thecontractor as reflecting his financial interest in the subsidiary or therespective financial interests of the holding company in the contractor andthe company related to the contractor or the financial interest of the holdingcompany in the contractor, as the case may be;

(c)

in the case of a DBS programme contractor or a teletext contractor, anyexpenditure incurred in connection with the collection of charges for thereception of programmes provided by him and broadcast in a DBS service or ina DBS or additional teletext service, as the case may be; and

(d)

in the case of a DBS programme or DBS teletext contractor, any expenditureincurred in connection with the provision of the satellite transponder.

(8)

In ascertaining relevant income or relevant expenditure no account shallbe taken of interest on any loan.

(9)

Items of relevant income and items of relevant expenditure shall beattributed to accounting periods in accordance with the foregoing provisionsof this Schedule.

(10)

In this paragraph “programme” means—

(a)

in the application of this Schedule in relation to the additional paymentsmentioned in section 32(1)(b), a television programme; and

(b)

in the application of this Schedule in relation to the additional paymentsmentioned in section 32(2)(b), a local sound broadcast.

Carry forward of losses

3

(1)

Where, in any accounting period, the relevant expenditure of a programmecontractor exceeds his relevant income, the excess shall be carried forwardto the following accounting period and treated as relevant expenditure forthat period for the purpose of computing his profits for that period.

(2)

When a programme contractor’s contract with the Authority comes to an end,no losses incurred at any time during the currency of that contract may becarried forward under this paragraph and set against income attributable toany subsequent contract between him and the Authority.

Computation of profits of programme contractors

4

(1)

It shall be the duty of the Authority—

(a)

to draw up, and from time to time review, a statement setting out theprinciples to be followed in ascertaining, for any accounting period, aprogramme contractor’s—

(i)

advertising revenue, and

(ii)

relevant income and relevant expenditure for the purpose of computing hisprofits;

(b)

in computing the advertising revenue and the profits of a programmecontractor for any accounting period, to take account of that statement(including any revision thereof which has taken effect before the end of thatperiod).

(2)

A statement under this paragraph may set out different principles for TVprogramme contractors, DBS programme contractors, programme contractors forthe provision of local sound broadcasting and teletext contractors.

(3)

Before drawing up or revising a statement under this paragraph theAuthority shall consult the Secretary of State and the Treasury.

(4)

The Authority shall—

(a)

publish the statement drawn up under this paragraph and every revision ofthat statement; and

(b)

transmit a copy of the statement, and of every revision of it, to theSecretary of State;

and the Secretary of State shall lay copies of the statement and of everysuch revision before each House of Parliament.

(5)

The principles relating to advertising revenue and to profits may be setout in separate statements under this paragraph; and where this is done itsprovisions apply to each statement.

Disputes

5

(1)

For the purposes of the principal sections and this Schedule—

(a)

the amount of any advertising revenue, or

(b)

the amount of any profits, or

(c)

the amount of any additional payments, or of an instalment of additionalpayments,

shall, in the event of a disagreement between the Authority and theprogramme contractor, be the amount determined by the Authority.

(2)

No determination of the Authority under this paragraph shall be called inquestion in any court of law, or be the subject of any arbitration; butnothing in this sub-paragraph shall prevent the bringing of proceedings forjudicial review.

Accounting periods

6

(1)

Subject to the provisions of this Schedule, each period for which a bodycorporate which is a programme contractor makes up a profit and loss accountwhich is laid before the body corporate in general meeting shall be anaccounting period, whether that period is a year or not.

(2)

If part of the said period for which a profit and loss account is made upfalls before, and part after—

(a)

the commencement of a relevant order under section 32, or

(b)

the time when the programme contractor begins or ceases to provideprogrammes for broadcasting by the Authority,

the two parts shall be treated as separate accounting periods.

In paragraph (a) “relevant order” means, in theapplication of this Schedule in relation to the additional payments mentionedin subsection (1)(b) or (as the case may be) subsection (2)(b) of section 32,an order having effect in relation to those payments.

(3)

Where two parts of such a period as is mentioned in sub-paragraph (1) fallto be divided from each other under sub-paragraph (2)(a), section 32(4) shallhave effect as if the profits and advertising revenue for each part were theprofits and advertising revenue for the whole multiplied by—

$\frac{X}{X+Y}$

where X and Y are respectively the number of weeks in that part and thenumber of weeks in the other part, counting (in each case) an odd four daysor more as a week.

(4)

If sub-paragraph (2)(b) would produce an accounting period of three monthsor less, that period shall be added on to the accounting period (if any) whichprecedes or succeeds it (and which does not fall to be divided from it undersub-paragraph (2)(b)).

(5)

A contract which varies another contract may modify the precedingprovisions of this paragraph.

(6)

Nothing in this paragraph shall create an accounting period during whichthe programme contractor is not providing programmes for broadcasting by theAuthority.

7

If a programme contractor is not a body corporate the contractor’saccounting periods shall be such as the Authority may direct, or as may beprovided in the contract.

Information

8

(1)

Every contract shall impose on the contractor such requirements withrespect to the furnishing of information to the Authority as appear to theAuthority, after consultation with the Secretary of State, to berequisite—

(a)

for enabling the Authority to perform their functions under the provisionsof the principal sections and this Schedule, and

(b)

for enabling the Authority to furnish to the Secretary of State suchinformation as he may require for the purpose of determining whether, and inwhat manner, to exercise his powers of making orders under the saidprovisions.

(2)

Without prejudice to the generality of sub-paragraph (1), the duty imposedon the Authority by that sub-paragraph includes the duty to impose, so far asis reasonably practicable, such requirements as will enable the Authority todetermine the amounts (if any) which, in relation to any programme contractor,are to be treated as advertising revenue and relevant income and relevantexpenditure for the computation of profits by virtue, respectively, ofparagraphs 1 and 2.

(3)

It shall be the duty of the Authority to furnish to the Secretary of Statesuch information (whether obtained from contractors or otherwise) as is intheir possession and is required by the Secretary of State for the purpose ofdetermining whether, and in what manner, to exercise his powers of makingorders under the said provisions.

9

It shall be the duty of the Authority in framing any contract to includeterms ensuring that the Authority will have the right to inspect accounts andrecords—

(a)

of the programme contractor, and

(b)

of any subsidiary of the programme contractor,

for the purpose of discharging their functions under the principalsections and this Schedule.

Interpretation

10

(1)

In this Schedule, and in the principal sections, except where the contextotherwise requires—

“accounting period” shall be construed in accordance withparagraph 6;

“additional payments” and “contract”—

(a)

in the application of this Schedule and the principal sections in relationto the additional payments mentioned in section 32(1)(b), mean respectivelyadditional payments payable by virtue of that paragraph and a contract betweenthe Authority and a programme contractor under which television programmes areto be provided by the programme contractor, and

(b)

in their application in relation to the additional payments mentioned insection 32(2)(b), mean respectively additional payments payable by virtue ofthat paragraph and a contract between the Authority and a programme contractorunder which local sound broadcasts are to be provided by the programmecontractor;

“related”, in relation to a company and a programmecontractor, means that another person (whether alone or jointly with one ormore persons and whether directly or indirectly) holds, or is beneficiallyentitled to, 50 per cent or more of the equity share capital, or possesses 50per cent or more of the voting power, in the company and in the programmecontractor and “holding company” means that other person; and

“subsidiary”, in relation to any person, means a company inwhich that person (whether alone or jointly with one or more persons andwhether directly or indirectly) holds, or is beneficially entitled to, 10 percent or more of the equity share capital, or possesses 10 per cent or more ofthe voting power.

(2)

In this Schedule “payment” includes any valuableconsideration, and references to revenue and receipts and expenditure shallbe construed accordingly.”