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Income Tax (Trading and Other Income) Bill


Income Tax (Trading and Other Income) Bill
Part 2 — Trading income
Chapter 9 — Trade profits: films and sound recordings

65

 

(6)   

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

5

be allocated to the relevant period under this section.

140     

Certified master versions: acquisition expenditure on limited-budget films

(1)   

This section applies if—

(a)   

the person carrying on the trade has incurred acquisition expenditure

in respect of the original master version of a film in, or before, the

10

relevant period,

(b)   

the acquisition was a relevant acquisition (see subsection (2)),

(c)   

the expenditure was incurred before 2nd July 2005 (see section 142 for

timing rule),

(d)   

the original master version is a certified master version,

15

(e)   

the film is genuinely intended for theatrical release, and

(f)   

the total production expenditure in respect of the original master

version is £15 million or less (see section 141).

(2)   

An acquisition is a relevant acquisition if—

(a)   

the acquisition is by the producer and the producer has not previously

20

acquired the original master version of the film, or

(b)   

the acquisition is directly from the producer and the original master

version of the film has not previously been acquired directly from the

producer,

   

and for this purpose “the producer” means the person who commissions the

25

making of the film and is entitled to control its exploitation.

(3)   

A deduction is allowed for the amount of the acquisition 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 acquisition

30

expenditure to the relevant period.

(5)   

But the total amount allocated under this section may not exceed the total

production expenditure in respect of the original master version.

(6)   

Expenditure may not be allocated to the relevant period under this section if it

is allocated—

35

(a)   

under this section to any other relevant period,

(b)   

under any other provision of this Chapter to the relevant period or any

other relevant period,

(c)   

under section 42 of F(No.2)A 1992 as applied by section 48(1) to (3) of

F(No.2)A 1997 to any other relevant period, or

40

(d)   

under section 40B or 41 of F(No.2)A 1992, or section 42 of that Act (but

not as applied by section 48(1) to (3) of F(No.2)A 1997), to the relevant

period or any other relevant period.

(7)   

If any acquisition expenditure in respect of the original master version is

allocated to the relevant period—

45

(a)   

under section 135 above, or

 
 

Income Tax (Trading and Other Income) Bill
Part 2 — Trading income
Chapter 9 — Trade profits: films and sound recordings

66

 

(b)   

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

   

no other acquisition expenditure in respect of the original master version may

be allocated to the relevant period under this section.

141     

“Total production expenditure in respect of the original master version”

(1)   

The following provisions of this section define what is meant by “the total

5

production expenditure in respect of the original master version” for the

purposes of sections 139 and 140.

(2)   

“The total production expenditure in respect of the original master version”

means the total of all the production expenditure in respect of the original

master version—

10

(a)   

whenever the expenditure is incurred, and

(b)   

whether or not it is incurred by the person carrying on the trade.

(3)   

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

15

within 4 months after the date of completion,

   

is ignored.

(4)   

Any part of the production expenditure in respect of the original master

version which—

(a)   

is incurred by a person under or as a result of a transaction entered into

20

directly or indirectly between that person and a connected person, and

(b)   

might have been expected to have been of a greater amount (“the arm’s

length amount”) if the transaction had been between independent

persons dealing at arm’s length,

   

is treated as having been of an amount equal to the arm’s length amount.

25

142     

When expenditure is incurred

(1)   

This section applies to determine when expenditure is treated as incurred for

the purposes of sections 139 and 140.

(2)   

The general rule is that an amount of expenditure is treated as incurred as soon

as there is an unconditional obligation to pay it.

30

(3)   

The general rule applies even if the whole or a part of the expenditure is not

required to be paid until a later date.

(4)   

There are the following exceptions to the general rule.

(5)   

If under an agreement—

(a)   

the expenditure is on the provision of an original master version,

35

(b)   

an unconditional obligation to pay an amount of the expenditure comes

into being as a result of the giving of a certificate or any other event,

(c)   

the giving of the certificate, or other event, occurs within the period of

one month after the end of a relevant period, and

(d)   

at or before the end of the relevant period, the original master version

40

has become the property of, or is otherwise under the agreement

attributed to, the person subject to the unconditional obligation to pay,

   

the expenditure is treated as incurred immediately before the end of the

relevant period.

 
 

Income Tax (Trading and Other Income) Bill
Part 2 — Trading income
Chapter 9 — Trade profits: films and sound recordings

67

 

(6)   

If under an agreement an amount of expenditure is not required to be paid

until a date more than 4 months after the unconditional obligation to pay has

come into being, the amount is treated as incurred on that date.

(7)   

If under an agreement—

(a)   

there is an unconditional obligation to pay an amount of expenditure

5

on a date earlier than accords with normal commercial usage, and

(b)   

the sole or main benefit which might (as a result) have been expected to

be obtained is that the amount would be treated, under the general rule,

as incurred at an earlier time,

   

the amount is treated as incurred on the date on or before which it is required

10

to be paid.

Election for sections 134 to 140 not to apply

143     

Election for sections 134 to 140 not to apply

(1)   

A person carrying on a trade which consists of or includes the exploitation of

original master versions of films may elect for sections 134 to 140 not to apply

15

in relation to expenditure if—

(a)   

the person incurs expenditure on the production or acquisition of an

original master version of a film,

(b)   

the original master version is a certified master version,

(c)   

its value is expected to be realisable over a period of not less than two

20

years, and

(d)   

the film is genuinely intended for theatrical release.

(2)   

The election must relate to all expenditure—

(a)   

incurred, or

(b)   

to be incurred,

25

   

on the production or acquisition of the original master version in question.

(3)   

The election is irrevocable.

(4)   

The election must be made on or before the first anniversary of the normal self-

assessment filing date for the tax year in which ends the relevant period in

which the original master version of the film is completed.

30

(5)   

For this purpose a film is completed—

(a)   

at the time given by section 131(5), or

(b)   

if the expenditure is acquisition expenditure and the acquisition takes

place after that time, at the time of the acquisition.

(6)   

No election may be made in relation to expenditure on the production or

35

acquisition of an original master version of a film if any of that expenditure has

been allocated—

(a)   

under any of sections 137 to 140 above, or

(b)   

under section 41 or 42 of F(No.2)A 1992.

 
 

Income Tax (Trading and Other Income) Bill
Part 2 — Trading income
Chapter 10 — Trade profits: certain telecommunication rights

68

 

Supplementary

144     

Meaning of “genuinely intended for theatrical release”

(1)   

This section determines for the purposes of this Chapter whether films are

genuinely intended for theatrical release.

(2)   

The relevant intention is the intention at the time the film is completed of the

5

person then entitled to determine how the film is to be exploited.

(3)   

“Theatrical release” means exhibition to the paying public at the commercial

cinema.

(4)   

A film is not regarded as genuinely intended for theatrical release unless it is

intended that a significant proportion of the earnings from the film should be

10

obtained by exhibition to the paying public at the commercial cinema.

Chapter 10

Trade profits: certain telecommunication rights

145     

Professions and vocations

The provisions of this Chapter apply to professions and vocations as they

15

apply to trades.

146     

Meaning of “relevant telecommunication right”

In this Chapter a “relevant telecommunication right” means—

(a)   

a licence granted under section 1 of the Wireless Telegraphy Act 1949

(c. 54) in accordance with regulations made under section 3 of the

20

Wireless Telegraphy Act 1998 (c. 6) (bidding for licences),

(b)   

an indefeasible right to use a telecommunications cable system, or

(c)   

a right derived (directly or indirectly) from such a licence or

indefeasible right.

147     

Expenditure and receipts treated as revenue in nature

25

(1)   

This section applies if, in accordance with generally accepted accounting

practice, an amount in respect of—

(a)   

expenditure on the acquisition of a relevant telecommunication right,

or

(b)   

a receipt from the disposal of a relevant telecommunication right,

30

   

is recognised in the accounts of a trade as an item in the calculation of profit or

loss.

(2)   

The amount is treated for income tax purposes as an item of a revenue nature.

(3)   

“The acquisition of a relevant telecommunication right” includes—

(a)   

the extension of rights attached to a relevant telecommunication right,

35

and

(b)   

if a relevant telecommunication right is subject to a derivative right, the

cancellation or restriction of rights attached to the derivative right.

(4)   

“The disposal of a relevant telecommunication right” includes—

 
 

Income Tax (Trading and Other Income) Bill
Part 2 — Trading income
Chapter 11 — Trade profits: other specific trades

69

 

(a)   

the cancellation or restriction of rights attached to a relevant

telecommunication right, and

(b)   

the granting of a derivative right or the extension of rights attached to

a derivative right.

148     

Credits or debits arising from revaluation

5

(1)   

This section applies if, in accordance with generally accepted accounting

practice, an amount in respect of the revaluation of a relevant

telecommunication right is recognised in the accounts of a trade (whether or

not as an item in the calculation of profit or loss).

(2)   

The amount is treated for income tax purposes as an item of a revenue nature.

10

(3)   

In calculating the profits of the trade, the amount is brought into account for

the period of account in which it is recognised.

Chapter 11

Trade profits: other specific trades

Dealers in securities etc.

15

149     

Taxation of amounts taken to reserves

(1)   

This section applies for the purpose of calculating the profits of a person’s

trade if a profit on the sale of securities would be brought into account in

calculating the profits of the trade.

(2)   

Profits and losses from the securities that in accordance with generally

20

accepted accounting practice are—

(a)   

calculated by reference to the fair value of the securities, and

(b)   

recognised in the person’s statement of recognised gains and losses or

statement of changes in equity,

   

are brought into account in calculating the profits of the trade.

25

(3)   

But subsection (2) does not apply—

(a)   

to an amount so far as deriving from or otherwise relating to an amount

brought into account under that subsection in an earlier period of

account, or

(b)   

to an amount recognised for accounting purposes by way of correction

30

of a fundamental error.

(4)   

In this section “securities” includes—

(a)   

shares,

(b)   

rights of unit holders in unit trust schemes to which TCGA 1992 applies

as a result of section 99 of TCGA 1992, and

35

(c)   

in the case of a company with no share capital, interests in the company

possessed by members of the company,

   

but does not include a loan relationship (within the meaning of Chapter 2 of

Part 4 of FA 1996).

 
 

 
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