|
| |
|
78 | Section 73 arrangements: profit share return not to be treated as distribution |
| |
Profit share return is not to be treated by virtue of section 209(2)(e)(iii) of ICTA |
| |
as being a distribution for the purposes of the Corporation Tax Acts. |
| |
| |
| 5 |
Schedule 4 (which contains further provision about the treatment of alternative |
| |
finance arrangements for the purposes of income tax, corporation tax and |
| |
capital gains tax) has effect. |
| |
80 | Application of Chapter |
| |
(1) | This Chapter has effect in relation to alternative finance arrangements entered |
| 10 |
into on or after 6th April 2005. |
| |
(2) | To the extent provided by subsections (3) to (6), this Chapter also has effect in |
| |
relation to alternative finance arrangements falling within section 73 entered |
| |
into before 6th April 2005 under which profit share return is payable on or after |
| |
that date (“existing profit share arrangements”). |
| 15 |
(3) | For the purposes of income tax, this Chapter has effect in relation to payments |
| |
of profit share return made on or after 6th April 2005 under existing profit |
| |
share arrangements to a person other than a company. |
| |
(4) | Where a company is a party to existing profit share arrangements— |
| |
(a) | this Chapter has effect in relation to the company in relation to those |
| 20 |
arrangements with effect from 6th April 2005, and |
| |
(b) | for the purposes of Chapter 2 of Part 4 of FA 1996, the loan which is |
| |
treated by section 74 as made by or to the company is a loan made on |
| |
6th April 2005 of an amount equal to the notional carrying value of the |
| |
asset or liability representing the existing profit share arrangements. |
| 25 |
(5) | For the purposes of subsection (4)(b) the notional carrying value is the amount |
| |
which would have been the carrying value of the asset or liability in the |
| |
accounts of the company (prepared in accordance with generally accepted |
| |
accounting practice) if a period of accounts had ended immediately before 6th |
| |
| 30 |
(6) | Section 78 has effect in relation to profit share return paid by a company on or |
| |
after 6th April 2005 under existing profit share arrangements. |
| |
81 | Interpretation of Chapter |
| |
| |
“alternative finance arrangements” has the meaning given by section |
| 35 |
| |
“alternative finance return” has the meaning given by section 71(5); |
| |
“financial institution” has the meaning given by section 70(2); |
| |
“profit share return” has the meaning given by section 73(2); |
| |
“property business” has the meaning given by section 263(6) of ITTOIA |
| 40 |
| |
|
| |
|
| |
|
| |
| |
Tax relief for limited-budget films |
| |
82 | Relief for production and acquisition expenditure on limited-budget films |
| |
(1) | In section 48 of F(No.2)A 1997 (relief for production and acquisition |
| 5 |
expenditure on limited-budget films), in subsection (2)— |
| |
(a) | in paragraph (a) for “before 2nd July 2005” substitute “, if it is |
| |
expenditure to which section 42(3) of that Act applies, before 1st |
| |
| |
(b) | after that paragraph insert— |
| 10 |
“(aa) | the first day of principal photography in relation to the |
| |
film concerned is before 1st April 2006;”, and |
| |
(c) | in paragraph (c) after “1997” insert “but before 1st January 2007”. |
| |
(2) | In section 139 of ITTOIA 2005 (certified master versions: production |
| |
expenditure on limited-budget films), in subsection (1)— |
| 15 |
(a) | in paragraph (aa) (requirement that film is completed) (inserted by |
| |
paragraph 30 of Schedule 5) after “period” insert “and before 1st |
| |
| |
(b) | for paragraph (b) (requirement that expenditure incurred before 2nd |
| |
| 20 |
“(b) | the first day of principal photography was before 1st |
| |
| |
(3) | In section 140 of that Act (certified master versions: acquisition expenditure on |
| |
limited-budget films), in subsection (1)— |
| |
(a) | in paragraph (aa) (requirement that film is completed) (inserted by |
| 25 |
paragraph 30 of Schedule 5), after “period” insert “and before 1st |
| |
| |
(b) | in paragraph (c) (requirement that expenditure incurred before 2nd |
| |
July 2005) for “2nd July 2005” substitute “1st October 2007”, and |
| |
(c) | after that paragraph insert— |
| 30 |
“(ca) | the first day of principal photography was before 1st |
| |
| |
(4) | The Treasury may by order amend any of the enactments amended by |
| |
subsections (1) to (3), so as to substitute for a date inserted by or under this |
| |
| 35 |
(5) | The amendments made by subsection (1) have effect in relation to claims made |
| |
under section 42 of F(No.2)A 1992 on or after 2nd July 2005. |
| |
(6) | The amendments made by subsections (2) and (3) have effect in relation to |
| |
deductions made under section 139 or 140 of ITTOIA 2005 on or after 2nd July |
| |
| 40 |
|
| |
|
| |
|
| |
83 | Restrictions on relief for production and acquisition expenditure |
| |
(1) | Schedule 5 (films: restrictions on relief for production and acquisition |
| |
| |
| 5 |
(a) | Part 1 imposes restrictions on the circumstances in which relief may be |
| |
| |
(b) | Part 2 imposes restrictions on the amount of relief which may be |
| |
| |
(c) | Part 3 makes minor and consequential amendments; |
| 10 |
(d) | Part 4 contains interpretation provisions. |
| |
Deferred income agreements |
| |
84 | Deferred income agreements which exist when relief claimed |
| |
(1) | This section applies where— |
| |
(a) | in relation to a trade or business (“the relevant trade”), a company (“C”) |
| 15 |
makes a claim on or after 2nd December 2004 under section 42 of |
| |
F(No.2)A 1992 for a deduction for a relevant period in respect of |
| |
expenditure relating to a film (“the claim”), and |
| |
(b) | when the claim is made, one or more deferred income agreements in |
| |
respect of the film exist to which C is or has been a party and which C |
| 20 |
entered into on or after 2nd December 2004. |
| |
(2) | C is to be treated for corporation tax purposes as receiving, in the relevant |
| |
period in respect of which the claim is made, an amount of income from the |
| |
relevant trade equal to the amount of excess relief. |
| |
(3) | If, at the time immediately after the end of the 15 year period, C is carrying on |
| 25 |
the relevant trade, C is to be treated for the purposes of section 40B of F(No.2)A |
| |
1992 (allocation of expenditure to periods) as incurring at that time relevant |
| |
film expenditure of an amount equal to the amount of excess relief. |
| |
(4) | The “amount of excess relief” is the amount given by the following formula— |
| |
| 30 |
| |
D is the amount which C is entitled to deduct under section 42 of F(No.2)A |
| |
1992 by virtue of the claim; |
| |
T1 is the number of days in the 15 year period; |
| |
T2 is the number of days in the period which begins with the operative |
| 35 |
date and ends with the final deferral date. |
| |
(5) | The “15 year period” means the period of 15 years which begins with the |
| |
| |
(6) | The “operative date” means— |
| |
|
| |
|
| |
|
(a) | where the claim is only in respect of expenditure incurred on the |
| |
acquisition of the original master version of the film, the date of that |
| |
| |
(b) | in any other case, the date upon which the film is completed. |
| |
(7) | The “final deferral date” means— |
| 5 |
(a) | the last date of deferral in relation to the deferred income agreement |
| |
mentioned in subsection (1)(b) (see section 85), or |
| |
(b) | where there is more than one such agreement, the date which is the |
| |
latest of the last dates of deferral in relation to those agreements. |
| |
(8) | “Relevant film expenditure” means expenditure of a revenue nature on the |
| 10 |
production or acquisition of the original master version of the film. |
| |
(9) | Any income received in a relevant period by virtue of this section is in addition |
| |
to any other income received in that period. |
| |
(10) | This section is deemed to have come into force on 2nd December 2004. |
| |
85 | Meaning of “deferred income agreement in respect of a film” |
| 15 |
(1) | For the purposes of section 84, a “deferred income agreement in respect of a |
| |
film” means an agreement which satisfies condition A or condition B. |
| |
(2) | Condition A is that the agreement (whether or not it supplements or varies |
| |
| |
(a) | guarantees to any person an amount of income arising from the |
| 20 |
exploitation of the film, and |
| |
(b) | has the effect that the last date of deferral is a date after the end of the |
| |
| |
(3) | Condition B is that the agreement— |
| |
(a) | supplements or varies another agreement (“the earlier agreement”) |
| 25 |
which guarantees to any person an amount of income arising from the |
| |
exploitation of the film, and |
| |
(b) | has the effect that the last date of deferral is a date which is after the end |
| |
of the 15 year period and after the last date of deferral (if any) in relation |
| |
to the earlier agreement. |
| 30 |
(4) | The “last date of deferral” means the last date upon which an amount of the |
| |
guaranteed income will or may arise. |
| |
(5) | It does not matter whether any of the agreements mentioned in subsection (2) |
| |
or (3) existed before 2nd December 2004. |
| |
(6) | For the purposes of this section— |
| 35 |
(a) | “agreement” means an agreement or series of agreements, and |
| |
(b) | an agreement “guarantees” an amount of income if the agreement, or |
| |
any part of it, is designed to secure the receipt of that amount (or at least |
| |
| |
(7) | This section is deemed to have come into force on 2nd December 2004. |
| 40 |
86 | Deferred income agreements entered into after relief claimed |
| |
(1) | This section applies where— |
| |
|
| |
|
| |
|
(a) | on or after 2nd December 2004, a company (“C”) enters into a deferred |
| |
income agreement in respect of a film in the course of carrying on a |
| |
trade or business (“the relevant trade”), and |
| |
(b) | before C entered into the agreement, a claim was made under section |
| |
42 of F(No.2)A 1992, in relation to the relevant trade, for a deduction for |
| 5 |
a relevant period in respect of expenditure relating to the film (“the |
| |
| |
(2) | C is to be treated for corporation tax purposes as receiving, in the relevant |
| |
period in which C entered into the deferred income agreement, an amount of |
| |
income from the relevant trade equal to the net excess relief. |
| 10 |
(3) | If, at the time immediately after the end of the 15 year period, C is carrying on |
| |
the relevant trade, C is to be treated for the purposes of section 40B of F(No.2)A |
| |
1992 (allocation of expenditure to periods) as incurring at that time relevant |
| |
film expenditure of an amount equal to the net excess relief. |
| |
(4) | The “net excess relief” is the amount of excess relief reduced (but not below nil) |
| 15 |
by the recovered amount (if any). |
| |
(5) | The “amount of excess relief” is the amount given by the following formula— |
| |
| |
| |
D is the amount which there was an entitlement to deduct under section |
| 20 |
42 of F(No.2)A 1992 by virtue of the claim; |
| |
T1 is the number of days in the 15 year period; |
| |
T2 is the number of days in the period which begins with the operative |
| |
date and ends with the final deferral date. |
| |
(6) | The “recovered amount” means the total of— |
| 25 |
(a) | the amount (if any) treated under section 84 as income received by C |
| |
from the relevant trade as a result of any application of that section in |
| |
relation to the claim as a result of C’s entry into any deferred income |
| |
agreement in respect of the film concerned, and |
| |
(b) | the total of any amounts treated under this section as income received |
| 30 |
by C from the relevant trade as a result of any previous application of |
| |
this section in relation to the claim as a result of C’s entry into any |
| |
previous relevant agreements. |
| |
(7) | The “15 year period” means the period of 15 years which begins with the |
| |
| 35 |
(8) | The “operative date” means— |
| |
(a) | where the claim is only in respect of expenditure incurred on the |
| |
acquisition of the original master version of the film, the date of that |
| |
| |
(b) | in any other case, the date upon which the film is completed. |
| 40 |
(9) | For the purposes of this section— |
| |
(a) | “deferred income agreement in respect of a film” has the same meaning |
| |
as it has for the purposes of section 84, |
| |
|
| |
|
| |
|
(b) | the “final deferral date” means the last date of deferral in relation to the |
| |
deferred income agreement mentioned in subsection (1)(a) (see section |
| |
| |
(c) | “previous relevant agreement” means a deferred income agreement in |
| |
respect of the film concerned which was entered into by C after the |
| 5 |
claim was made and before the entry into the deferred income |
| |
agreement mentioned in subsection (1)(a), and |
| |
(d) | “relevant film expenditure” means expenditure of a revenue nature on |
| |
the production or acquisition of the original master version of the film. |
| |
(10) | It does not matter for the purposes of subsection (1) whether the claim was |
| 10 |
made before, or on or after, 2nd December 2004. |
| |
(11) | Any income received in a relevant period by virtue of this section is in addition |
| |
to any other income received in that period. |
| |
(12) | This section is deemed to have come into force on 2nd December 2004. |
| |
87 | Sections 84 to 86: supplementary |
| 15 |
(1) | For the purposes of sections 84 to 86 a company is not to be regarded as |
| |
entering into an agreement on or after 2nd December 2004 where the company |
| |
entered into the agreement in pursuance of an obligation of the company |
| |
which immediately before that date was an unconditional obligation. |
| |
(2) | In determining, for the purposes of subsection (1), whether an obligation in |
| 20 |
pursuance of which a company entered into an agreement was an |
| |
unconditional obligation immediately before 2nd December 2004, the |
| |
obligation is not to be regarded as a conditional obligation at that time by |
| |
reason only that it was contingent on a condition the fulfilment of which was |
| |
outside the control of the company. |
| 25 |
(3) | For the purposes of this section and sections 84 to 86— |
| |
“film” is to be construed in accordance with paragraph 1 of Schedule 1 to |
| |
the Films Act 1985 (c. 21); |
| |
“original master version” is to be construed in accordance with section 43 |
| |
| 30 |
“relevant period” has the meaning given in section 40B of that Act. |
| |
(4) | For the purposes of sections 84 to 86 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. |
| |
(5) | This section is deemed to have come into force on 2nd December 2004. |
| 35 |
88 | Transitional provision for years of assessment before the year 2005-06 |
| |
(1) | Section 84 has effect, for income tax purposes, for the year 2004-05 and earlier |
| |
years of assessment as if— |
| |
(a) | in paragraph (a) of subsection (1), for “company” there were |
| |
substituted “person”, and |
| 40 |
(b) | in subsection (2) for “corporation tax” there were substituted “income |
| |
| |
(2) | Section 86 has effect, for income tax purposes, for the year 2004-05 and earlier |
| |
years of assessment as if— |
| |
|
| |
|
| |
|
(a) | in paragraph (a) of subsection (1), for “company” there were |
| |
substituted “person”, and |
| |
(b) | in subsection (2) for “corporation tax” there were substituted “income |
| |
| |
(3) | Section 87 has effect, for income tax purposes, for the year 2004-05 and earlier |
| 5 |
years of assessment as if, in subsections (1) and (2), for “company” there were |
| |
| |
(4) | This section is deemed to have come into force on 2nd December 2004. |
| |
89 | Corresponding provision in ITTOIA 2005 |
| |
(1) | After section 142 of ITTOIA 2005 (when expenditure is incurred) insert— |
| 10 |
“Deferred income agreements |
| |
142A | Deferred income agreements which exist when deduction made |
| |
(1) | This section applies where— |
| |
(a) | in calculating the profits of a relevant period of a trade carried |
| |
on by a person (“P”), a deduction is made under any of sections |
| 15 |
138 to 140 in respect of expenditure relating to a film (“the |
| |
relevant expenditure”), and |
| |
(b) | when the deduction is made, one or more deferred income |
| |
agreements in respect of the film exist to which P is or has been |
| |
a party and which P entered into on or after 2nd December 2004. |
| 20 |
(2) | An amount equal to the amount of excess relief is brought into account |
| |
as a receipt in calculating the profits of the trade of the relevant period |
| |
in respect of which the deduction was made. |
| |
(3) | If, at the time immediately after the end of the 15 year period, P is |
| |
carrying on the trade, P is to be treated for the purposes of section 135 |
| 25 |
(normal rules for allocating expenditure to periods) as incurring at that |
| |
time relevant film expenditure of an amount equal to the amount of |
| |
| |
(4) | The “amount of excess relief” is the amount given by the following |
| |
| 30 |
| |
| |
D is the amount of the deduction allowed; |
| |
T1 is the number of days in the 15 year period; |
| |
T2 is the number of days in the period which begins with the |
| 35 |
operative date and ends with the final deferral date. |
| |
(5) | The “15 year period” means the period of 15 years which begins with |
| |
| |
(6) | The “operative date” means— |
| |
(a) | where the relevant expenditure is acquisition expenditure only, |
| 40 |
the date of the acquisition in question, and |
| |
|
| |
|