Income Tax (Trading and Other Income) Act 2005

[F1 138 Certified master versions: production expenditure U.K.

(1) This section applies if—

(a) the person carrying on the trade has incurred production expenditure in respect of the original master version of a film in, or before, the relevant period,

[F2 (aa) section 139 does not apply in relation to that film,]

(b) the film was completed in, or before, that period,

(c) the original master version is a certified master version,

(d) the original master version was owned by that person at the time the film was completed,

(e) the film is genuinely intended for theatrical release, and

(f) there has not already been a disqualifying deduction in respect of expenditure relating to the film (see section 140A).

[F3 (1A) Any expenditure which—

(a) has not been paid at the time the film is completed, and

(b) is not, at that time, the subject of an unconditional obligation to pay within 4 months after the date of completion,

is not regarded as production expenditure for the purposes of this section.]

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

(3) The person carrying on the trade may allocate up to the permissible amount of the expenditure to the relevant period.

(4) The permissible amount of the expenditure is the smallest amount given by the following calculations.

(5) The calculations are—

Calculation 1

Calculate one-third of the total production expenditure incurred by the person in respect of the original master version (“the total expenditure”).

Calculation 2

Calculate one-third of the sum obtained by deducting from the total expenditure—

(a) any amount of the total expenditure already allocated under section 137, [F4 and]

(b) any amount of the total expenditure already allocated under section 41 of F(No.2)A 1992,

(c) F5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Calculation 3

Calculate so much of the total expenditure as has not already been allocated to the relevant period or any other relevant period—

(a) under this section or any other provision of this Chapter, or

(b) under any of sections 40B, 41 or 42 of F(No.2)A 1992.

(6) If the relevant period is less than 12 months the above references to one-third are to be read as references to a proportionately smaller fraction.

(7) If any production expenditure in respect of the original master version is allocated to the relevant period—

(a) under section 135 above, or

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

no other production expenditure in respect of the original master version may be allocated to the relevant period under this section.]

Textual Amendments

F1 Ss.138 138A substituted for s. 138 (with effect as mentioned in Sch. 3 para. 3(2)(3) of the amending Act) by Finance Act 2005 (c. 7), s. 59, Sch. 3 para. 3(1)(4)

F2 S.138(1)(aa) inserted (with effect as mentioned in Sch. 3 para. 11(5)-(7) of the amending Act) by Finance Act 2005 (c. 7), s. 59, Sch. 3 para. 11(2)

F3 S.138(1A) inserted (with effect as mentioned in Sch. 3 para. 11(5)(6)(8) of the amending Act) by Finance Act 2005 (c. 7), s. 59, Sch. 3 para. 11(3)

F4 Word in s.138((5) inserted (with effect as mentioned in Sch. 3 para. 11(5)-(7) of the amending Act) by Finance Act 2005 (c. 7), s. 59, Sch. 3 para. 11(4)(a)

F5 Words in s.138(5) repealed (with effect as mentioned in Sch. 3 para. 11(5)-(7) of the amending Act) by Finance Act 2005 (c. 7), ss. 59, 104, Sch. 3 para. 11(4)(b), Sch. 11 Pt. 2(3)

Modifications etc. (not altering text)

C1 S.138 restricted (with effect as mentioned in Sch. 3 para. 8(5) of the amending Act) by Finance Act 2005 (c. 7), s. 59, Sch. 3 para. 8(1)-(4)