Valid from 22/03/2001
(1)In computing the profits or gains accruing to any person from a trade or business which consists of or includes the exploitation of master versions of films, expenditure which is—
(a)incurred on the production or acquisition of a master version of a film, and
(b)expenditure of a revenue nature (whether as a result of section 40A above or otherwise),
must be allocated to relevant periods in accordance with this section.
(2)Subsection (1) above does not apply if an election under section 40D below has effect with respect to the expenditure.
(3)In this section “relevant period” means—
(a)a period for which the accounts of the trade or business concerned are made up, or
(b)if no accounts of the trade or business concerned are made up for a period—
(i)if the profits or gains accrue to a company within the charge to corporation tax, the accounting period of the company;
(ii)in any other case, the period the profits or gains of which are taken into account in assessing the income of the trade or business for a year of assessment.
(4)The amount of expenditure falling within subsection (1) above which falls to be allocated to any relevant period is so much as is just and reasonable, having regard to—
(a)the amount of that expenditure which remains unallocated at the beginning of that period,
(b)the proportion which the estimated value of the master version of the film which is realised in that period (whether by way of income or otherwise) bears to the aggregate of the value so realised and the estimated remaining value of the master version at the end of that period, and
(c)the need to bring the whole of the expenditure falling within subsection (1) above into account over the time during which the value of the master version is expected to be realised.
(5)In addition to any expenditure which is allocated to a relevant period in accordance with subsection (4) above, if a claim is made, there must also be allocated to that period so much of the unallocated expenditure as is specified in the claim and does not exceed the difference between—
(a)the amount allocated to that period in accordance with subsection (4) above, and
(b)the value of the master version of the film which is realised in that period (whether by way of income or otherwise).
(6)A claim under subsection (5) above must be made—
(a)for the purposes of income tax, on or before the first anniversary of the 31st January next following the year of assessment in which ends the relevant period mentioned in that subsection;
(b)for the purposes of corporation tax, not later than two years after the end of the relevant period to which the claim relates.
(7)In subsection (5) above “the unallocated expenditure”, in relation to a relevant period, is any expenditure falling within subsection (1) above—
(a)which does not fall to be allocated to that period in accordance with subsection (4) above, and
(b)which has not been allocated to any earlier relevant period in accordance with subsection (4) or (5) above.
Textual Amendments
F1S. 40B inserted (22.3.2001 with effect as mentioned in s. 579(1) of the amending Act) by 2001 c. 2, ss. 578, 579(1), Sch. 2 para. 82
Modifications etc. (not altering text)
C1S. 40B applied (with modifications) (22.3.2001 with effect as mentioned in s. 579(1) of the amending Act) by 2001 c. 2, s. 579, Sch. 3 Pt. XIII para. 116