Finance Bill

House of Commons

Session 2004 - 05
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Finance Bill

Finance Bill
Schedule 4 — Alternative finance arrangements: further provisions
147

Schedule 4
Section 79

Alternative finance arrangements: further provisions
Interpretation of Schedule
1
In this Schedule, “relevant arrangements” means—
(a)
arrangements which fall within section 71 under which the person
5
referred to in that section as Y is a financial institution, or
(b)
arrangements falling within section 73.
Taxes Management Act 1970 (c. 9)
2
In sections 17 and 18 of TMA 1970 (interest paid etc. without deduction of
income tax), references to interest include references to alternative finance
10
return or profit share return.
Income and Corporation Taxes Act 1988 (c. 1)
3
Section 349 of ICTA (certain payments to be made subject to deduction of
income tax) has effect in relation to alternative finance return or profit share
return as it has effect in relation to interest.
15
4
In section 468L of ICTA (interest distributions), in subsection (9)(a), the
reference to money placed at interest includes a reference to money invested
under relevant arrangements.
5
Section 477A of ICTA (building societies: regulations for deduction of tax),
applies in relation to alternative finance return and profit share return paid
20
or credited under relevant arrangements as it applies in relation to interest
paid or credited in respect of a deposit or loan.
6
Sections 480A to 482 of ICTA (relevant deposits: deduction of tax from
interest payments etc.) have effect as if—
(a)
relevant arrangements were a deposit, and
25
(b)
alternative finance return or profit share return payable under
relevant arrangements were interest.
7
In section 582 of ICTA (funding bonds) references to interest include
references to alternative finance return or profit share return.
8
Section 787 of ICTA (restriction of relief for payments of interest) has effect
30
in relation to alternative finance return or profit share return as it has effect
in relation to interest.
Finance Act 1996 (c. 8)
9
In paragraph 8(2)(a) of Schedule 10 to FA 1996 (loan relationships: collective
investment schemes), the reference to money placed at interest includes a
35
reference to money invested under relevant arrangements.
Income Tax (Trading and Other Income) Act 2005
10
In section 380 of ITTOIA 2005 (funding bonds), references to interest include
references to alternative finance return or profit share return.

Finance Bill
Schedule 5 — Films: restrictions on relief for production and acquisition expenditure
Part 1 — Restrictions on circumstances in which relief may be obtained
148

Schedule 5
Section 83

Films: restrictions on relief for production and acquisition expenditure
Part 1
Restrictions on circumstances in which relief may be obtained
Section 42 of the Finance (No.2) Act 1992 (c. 48)
5
1     (1)
Section 42 of F(No.2)A 1992 (relief for production or acquisition
expenditure) is amended as follows.
      (2)
In subsection (2) omit “and” immediately before paragraph (b) and after that
paragraph insert “, and
(c)
that version was owned by the claimant at the time the film
10
was completed.”
      (3)
In subsection (3) omit “and” immediately before paragraph (b) and after that
paragraph insert “, and
(c)
that version has not previously been acquired by the
claimant.”
15
      (4)
After subsection (3) insert—
“(3A)
A claim under this section for a relevant period, in relation to the
original master version of a film, may be made in respect of either
expenditure to which subsection (2) applies or expenditure to which
subsection (3) applies, but not both.
20
(3B)
Where, in relation to a trade or business, a company (“C”) makes a
claim under this section (“the relevant claim”) for a deduction in
respect of expenditure relating to the original master version of a
film, C is not entitled to make that deduction if—
(a)
the relevant claim is in respect of expenditure to which
25
subsection (2) applies and—
(i)
a previous claim under this section has been made in
relation to the same trade or business for any relevant
period, or
(ii)
in computing the profits of that trade or business of
30
any relevant period, a deduction has been made
under section 138, 138A or 140 of the Income Tax
(Trading and Other Income) Act 2005,

in respect of expenditure incurred on the acquisition of that
version,
35
(b)
the relevant claim is in respect of expenditure to which
subsection (3) applies and—
(i)
a previous claim under this section has been made in
relation to the same trade or business for any relevant
period, or
40
(ii)
in computing the profits of that trade or business of
any relevant period, a deduction has been made
under section 138 or 139 of that Act,

in respect of expenditure incurred on the production of that
version,
45

Finance Bill
Schedule 5 — Films: restrictions on relief for production and acquisition expenditure
Part 1 — Restrictions on circumstances in which relief may be obtained
149

(c)
a previous claim under this section has been made in relation
to another trade or business, for any relevant period, in
respect of expenditure to which subsection (2) or (3) applies
which relates to that version, or
(d)
a deduction has been made in respect of expenditure relating
5
to that version under any of sections 138 to 140 of the Income
Tax (Trading and Other Income) Act 2005 in computing the
profits of another trade or business of any relevant period.
(3C)
For the purposes of subsection (3B)—
(a)
it does not matter whether the previous claim was made
10
before, or on or after, 2nd December 2004, and
(b)
“relevant period”, in relation to a deduction under the
Income Tax (Trading and Other Income) Act 2005, means a
relevant period within the meaning of section 133 of that Act.
(3D)
Where, in relation to any particular film, more than one claim under
15
this section is made at the same time, the Inland Revenue may
determine which of the claims is to be regarded as made first for the
purposes of subsection (3B).

In this subsection references to a claim under this section are to be
read as including references to a deduction of a kind mentioned in
20
that subsection.
(3E)
In this section “the Inland Revenue” means any officer of the Board.”
      (5)
After subsection (5) insert—
“(5A)
For the purposes of subsection (4) the total expenditure incurred by
the claimant on the production or acquisition of the original master
25
version of the film concerned is—
(a)
in the case of a deduction in respect of expenditure to which
subsection (2) applies, the total expenditure incurred by the
claimant on the production of the original master version of
the film concerned, and
30
(b)
in the case of a deduction in respect of expenditure to which
subsection (3) applies, the total expenditure incurred by the
claimant on the acquisition of that original master version
(“the claimant’s acquisition expenditure”).”
      (6)
Subject to sub-paragraphs (7) to (10), the amendments made by this
35
paragraph are deemed to have come into force on 2nd December 2004.
      (7)
The amendments made by this paragraph do not have effect in relation to
any claim for relief which—
(a)
is made before 2nd December 2004, or
(b)
is in respect of expenditure relating to a film which was in
40
production on that date.
      (8)
The amendments made by sub-paragraphs (2) and (3) do not have effect in
relation to pre-announcement expenditure.
      (9)
Where the relevant claim within the meaning of subsection (3B) of section 42
of F(No.2)A 1992 is a claim in respect of pre-announcement expenditure
45
only, the references in paragraphs (a) to (d) of that subsection to a previous
claim, or a deduction, do not include a previous claim, or a deduction, in
respect of pre-announcement expenditure only.

Finance Bill
Schedule 5 — Films: restrictions on relief for production and acquisition expenditure
Part 1 — Restrictions on circumstances in which relief may be obtained
150

     (10)
Section 42 of F(No.2)A 1992 (as amended by this Schedule) has effect, for
income tax purposes, for the year 2004-05 and earlier years of assessment, as
if in subsection (3B) for “company” there were substituted “person”.
     (11)
For the purposes of this paragraph “claim for relief” means a claim for relief
under section 42 of F(No.2)A 1992 (including a claim for relief under that
5
section as modified by section 48 of F(No.2)A 1997).
Section 101 of the Finance Act 2002 (c. 23)
2     (1)
Section 101 of FA 2002 (restriction of relief for successive acquisitions of the
same film) shall cease to have effect.
      (2)
The repeal made by this paragraph is deemed to have come into force on 2nd
10
December 2004.
      (3)
But that repeal does not have effect in relation to—
(a)
any claim for relief which was made before 2nd December 2004,
(b)
any claim for relief which is in respect of expenditure relating to a
film which was in production on that date, or
15
(c)
any claim for relief—
(i)
which is made on or after that date, and
(ii)
in relation to which section 42(3B) of F(No.2)A 1992 (as
inserted by paragraph 1) would operate to prevent a
deduction being made, but for paragraph 1(9) (transitional
20
provision in respect of pre-announcement expenditure).
      (4)
For the purposes of sub-paragraph (3) “claim for relief” means a claim for
relief under section 42 of F(No.2)A 1992 as modified by section 48 of
F(No.2)A 1997.
Section 138 of the Income Tax (Trading and Other Income) Act 2005
25
3     (1)
For section 138 of ITTOIA 2005 (certified master versions: production or
acquisition expenditure) substitute—
“138
Certified master versions: production expenditure
(1)
This section applies if—
(a)
the person carrying on the trade has incurred production
30
expenditure in respect of the original master version of a film
in, or before, the relevant period,
(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
35
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).
(2)
A deduction is allowed for the amount of the expenditure allocated
40
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.

Finance Bill
Schedule 5 — Films: restrictions on relief for production and acquisition expenditure
Part 1 — Restrictions on circumstances in which relief may be obtained
151

(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
5
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—
10
(a)
any amount of the total expenditure already allocated under
section 137,
(b)
any amount of the total expenditure already allocated under
section 41 of F(No.2)A 1992, and
(c)
any amount of the total expenditure that has already been, or
15
is capable of being, allocated under section 139 below or
under section 42 of F(No.2)A 1992 as applied by section 48(1)
to (3) of F(No.2)A 1997 (corresponding corporation tax
provision).

Calculation 3
20

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
25
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
30
(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.
138A
Certified master versions: acquisition expenditure
(1)
This section applies if—
35
(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 relevant period,
(b)
the original master version has not previously been acquired
by that person,
40
(c)
the film was completed in, or before, that period,
(d)
the original master version is a certified master version,
(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).
45
(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.

Finance Bill
Schedule 5 — Films: restrictions on relief for production and acquisition expenditure
Part 1 — Restrictions on circumstances in which relief may be obtained
152

(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—
5

Calculation 1

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

Calculation 2
10

Calculate one-third of the sum obtained by deducting from the total
expenditure any amount of the total expenditure that has already
been, or is capable of being, allocated under section 140 below or
under section 42 of F(No.2)A 1992 as applied by section 48(1) to (3) of
F(No.2)A 1997 (corresponding corporation tax provision).
15

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 or 42 of F(No.2)A 1992.
20
(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 acquisition expenditure in respect of the original master
version is allocated to the relevant period—
25
(a)
under section 135 above, or
(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.”
      (2)
Subject to sub-paragraphs (3) and (4), the amendments made by this
30
paragraph have effect for the year 2005-06 and subsequent years of
assessment.
      (3)
Those amendments do not have effect in relation to any film which was in
production on 2nd December 2004.
      (4)
In relation to pre-announcement expenditure—
35
(a)
section 138 of ITTOIA 2005 (as substituted by this paragraph) has
effect as if subsection (1)(d) of that section were omitted, and
(b)
section 138A of that Act (as so substituted) has effect as if subsection
(1)(b) of that section were omitted.
Section 139 of the Income Tax (Trading and Other Income) Act 2005
40
4     (1)
Section 139 of ITTOIA 2005 (certified master versions: production
expenditure on limited-budget films) is amended as follows.
      (2)
In subsection (1), after paragraph (c) insert—
“(ca)
the original master version was owned by that person at the
time the film was completed,”.
45

Finance Bill
Schedule 5 — Films: restrictions on relief for production and acquisition expenditure
Part 1 — Restrictions on circumstances in which relief may be obtained
153

      (3)
In that subsection omit “and” immediately before paragraph (e) and after
that paragraph insert “, and
(f)
there has not already been a disqualifying deduction in
respect of expenditure relating to the film (see section 140A).”
      (4)
Subject to sub-paragraphs (5) and (6), the amendments made by this
5
paragraph have effect for the year 2005-06 and subsequent years of
assessment.
      (5)
Those amendments do not have effect in relation to any film which was in
production on 2nd December 2004.
      (6)
The amendment made by sub-paragraph (2) does not have effect in relation
10
to pre-announcement expenditure.
Section 140 of the Income Tax (Trading and Other Income) Act 2005
5     (1)
Section 140 of ITTOIA 2005 (certified master versions: acquisition
expenditure on limited-budget films) is amended as follows.
      (2)
In subsection (1)—
15
(a)
omit paragraph (b),
(b)
before paragraph (c) insert—
“(ba)
the original master version has not previously been
acquired by that person,”, and
(c)
omit “and” immediately before paragraph (f) and after that
20
paragraph insert “, and
(g)
there has not already been a disqualifying deduction
in respect of expenditure relating to the film (see
section 140A).”
      (3)
Omit subsection (2).
25
      (4)
Subject to sub-paragraphs (5) to (7), the amendments made by this
paragraph have effect for the year 2005-06 and subsequent years of
assessment.
      (5)
Those amendments do not have effect in relation to any film which was in
production on 2nd December 2004.
30
      (6)
The amendments made by sub-paragraphs (2)(a) and (3) do not have effect
in a case where subsection (1)(g) of section 140 of ITTOIA 2005 (as inserted
by this paragraph) would operate to prevent a deduction being made under
that section, but for paragraph 6(3) of this Schedule (transitional provision
in respect of pre-announcement expenditure).
35
      (7)
The amendment made by sub-paragraph (2)(b) does not have effect in
relation to pre-announcement expenditure.