Income Tax (Trading and Other Income) Act 2005

137 Certified master versions: preliminary expenditure

(1) This section applies if—

(a) the person carrying on the trade has incurred preliminary expenditure in connection with a film in, or before, the relevant period,

(b) the certified master version condition is met (see subsection (2)), and

(c) the film is genuinely intended for theatrical release.

(2) The certified master version condition is—

(a) if the film is completed, that the original master version of it is a certified master version, or

(b) if the film is not completed, that it is reasonably likely that, if the film were completed, the original master version of it would be a certified master version.

(3) A deduction is allowed for the amount of the preliminary expenditure allocated to the relevant period, but this is subject to the application of any prohibitive rule.

(4) The person carrying on the trade may allocate up to 100% of the preliminary expenditure to the relevant period.

(5) But the total amount allocated under this section must not exceed 20% of the budgeted total expenditure on the film, calculated as at the first day of principal photography.

(6) Expenditure may not be allocated to the relevant period under this section if—

(a) it is allocated under this section to any other relevant period,

(b) it is allocated under any other provision of this Chapter to the relevant period or any other relevant period,

(c) it is allocated under section 41 of F(No.2)A 1992 to any other relevant period,

(d) it is allocated under section 40B or 42 of that Act to the relevant period or any other relevant period, or

(e) a deduction in respect of it has otherwise been made in calculating the profits of the trade for income or corporation tax purposes.

(7) If any preliminary expenditure in connection with the film is allocated to the relevant period—

(a) under section 135 above, or

(b) under section 40B of F(No.2)A 1992,

no other preliminary expenditure in connection with the film may be allocated to the relevant period under this section.

(8) So far as a deduction is given in respect of any expenditure—

(a) under this section, or

(b) under section 41 of F(No.2)A 1992,

no further deduction is allowed in respect of that expenditure in calculating the profits of the trade for income tax purposes.