Part 2Trading income

Chapter 9Trade profits: films and sound recordings

Introduction

130Expenditure to which this Chapter applies

(1)

This Chapter makes provision about—

(a)

expenditure incurred on the production or acquisition of the original master version of a film or sound recording, and

(b)

preliminary expenditure in relation to a film.

(2)

In this Chapter references to production expenditure are to expenditure incurred on the production of the original master version of a film or sound recording.

(3)

In this Chapter references to acquisition expenditure are to expenditure incurred on the acquisition of the original master version of a film or sound recording.

(4)

In this Chapter references to the original master version of a film or sound recording include any rights in the original master version of a film or sound recording that are held or acquired with it.

(5)

In this Chapter references to production or acquisition expenditure do not include—

(a)

interest (as to which, see section 29), or

(b)

the incidental costs of obtaining finance (as to which, see sections 58 and 59).

(6)

In this Chapter “preliminary expenditure”, in relation to a film, means expenditure which—

(a)

can reasonably be said to have been incurred with a view to enabling a decision to be taken as to whether to make the film,

(b)

is payable before the first day of principal photography (if the decision is to make the film), and

(c)

is not repayable under a contract or other arrangement if the film is not made.

(7)

In this Chapter “any prohibitive rule” means any provision of the Income Tax Acts which—

(a)

prohibits a deduction from being made, or

(b)

restricts the extent to which it is allowed,

in calculating the profits of a trade.

131Meaning of “film” and related expressions

(1)

In this Chapter “film” includes any record, however made, of a sequence of visual images which is capable of being used as a means of showing that sequence as a moving picture.

(2)

For the purposes of this Chapter each part of a series of films is treated as a separate film.

(3)

But if the Secretary of State has given a direction under paragraph 1(4) of Schedule 1 to the Films Act 1985 (c. 21) that parts of a series of films are to be treated as a single film for the purposes of that Schedule, they are also treated as a single film for the purposes of this Chapter.

(4)

In this Chapter references to a film include the film soundtrack (if any).

(5)

For the purposes of this Chapter a film is completed when it is first in a form in which it can reasonably be regarded as ready for copies of it to be made and distributed for presentation to the general public.

132Meaning of “original master version” and “certified master version”

(1)

In this Chapter “original master version” means—

(a)

in relation to a film, the original master negative, tape or disc, and

(b)

in relation to a sound recording, the original master audio tape or disc.

(2)

In this Chapter references to the original master version of a film include the original master version of the film soundtrack (if any).

(3)

In this Chapter “certified master version”, in relation to a film, means an original master negative, tape or disc which is certified under paragraph 3 of Schedule 1 to the Films Act 1985 as a qualifying film, tape or disc for the purposes of this Chapter.

133Meaning of “relevant period”

In this Chapter “relevant period”, in relation to a trade, means—

(a)

a period of account of the trade, or

(b)

if no accounts of the trade are drawn up for a period, the basis period for a tax year.