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Finance (No.2) Bill


Finance (No.2) Bill
Part 3 — Income tax, corporation tax and capital gains tax
Chapter 2 — Reliefs for business

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(7)   

In paragraph 8(1) of Schedule 18 to FA 1998 (tax calculation in company tax

return), in the second step, omit “or 13AA(2)”.

(8)   

The amendments made by this section have effect for the financial year 2006

and subsequent financial years (but see also subsections (9) to (11)).

(9)   

In the case of an accounting period (a “straddling period”)—

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(a)   

beginning before 1st April 2006, and

(b)   

ending on or after that date,

   

sections 13AA and 13AB of, and Schedule A2 to, ICTA (“the repealed

provisions”) apply as if the different parts of the straddling period falling in the

different financial years were separate accounting periods.

10

(10)   

Where the rate of corporation tax charged on a company’s basic profits for any

such separate accounting period ending with 31st March 2006 is determined in

accordance with any of the repealed provisions, section 13 of ICTA (small

companies’ relief) also so applies.

(11)   

For the purpose of treating different parts of the straddling period as separate

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accounting periods in accordance with subsections (9) and (10), the profits and

basic profits of the straddling period are to be apportioned between those

separate accounting periods.

Chapter 2

Reliefs for business

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Group relief

27      

Group relief where surrendering company not resident in UK

Schedule 1 (which makes provision in relation to group relief where the

surrendering company is not resident in the United Kingdom) has effect.

Research and development

25

28      

Relief for research and development: subjects of clinical trials

(1)   

Schedule 2 (which amends Schedule 20 to FA 2000 and Schedules 12 and 13 to

FA 2002 so as to make provision relating to payments to subjects of clinical

trials) has effect.

(2)   

The amendments made by paragraph 2 of Schedule 2 to Schedule 12 to FA 2002

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(large companies etc) have effect in relation to expenditure incurred on or after

1st April 2006.

(3)   

Except as provided by subsection (4), the amendments made by Schedule 2

to—

(a)   

Schedule 20 to FA 2000 (small or medium-sized enterprises),

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(b)   

Schedule 13 to FA 2002 (vaccine research etc),

   

have effect in relation to expenditure incurred on or after the appointed day.

(4)   

The amendment made by paragraph 1(3) of Schedule 2 (insertion of paragraph

6A of Schedule 20 to FA 2000), in its application for the purposes of Schedule

12 to FA 2002 by virtue of the amendments made to Schedule 12 by paragraph

40

 
 

Finance (No.2) Bill
Part 3 — Income tax, corporation tax and capital gains tax
Chapter 3 — Films and sound recordings

28

 

2 of Schedule 2, has effect in relation to expenditure incurred on or after 1st

April 2006.

(5)   

“The appointed day” means such day as the Treasury may by order appoint;

and different days may be so appointed for different provisions or different

purposes.

5

(6)   

The days that may be appointed by an order under this section include days

earlier than the day on which this Act is passed, but not days earlier than 1st

April 2006.

29      

Claims for relief for research and development

Schedule 3 (which amends Schedule 18 to FA 1998 in connection with claims

10

for tax relief for expenditure on research and development) has effect.

Capital allowances

30      

Temporary increase in amount of first-year allowances for small enterprises

(1)   

The amount of a first-year allowance under section 44 of CAA 2001

(expenditure incurred by small or medium-sized enterprises) shall be

15

determined, in the case of expenditure to which this subsection applies, as if

the percentage specified in the entry relating to that section in the Table in

section 52(3) of that Act were 50%.

(2)   

Subsection (1) applies to expenditure incurred by a small enterprise (within the

meaning of section 44 of that Act) in the period of 12 months beginning with—

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(a)   

1st April 2006, if the small enterprise is within the charge to corporation

tax, or

(b)   

6th April 2006, if the small enterprise is within the charge to income tax.

(3)   

Accordingly, in section 52(3) of CAA 2001, for the sentence following the Table

substitute—

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“In the case of expenditure qualifying under section 44, see also—

(a)   

section 142 of the Finance Act 2004 (substitution of 50% in the

case of expenditure incurred by a small enterprise in 2004-05 or

financial year 2004);

(b)   

section 30 of the Finance Act 2006 (substitution of 50% in the

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case of expenditure incurred by a small enterprise in 2006-07 or

financial year 2006).”.

Chapter 3

Films and sound recordings

Introductory

35

31      

Meaning of “film” and related expressions

(1)   

In this Chapter “film” includes any record, however made, of a sequence of

visual images that is capable of being used as a means of showing that

sequence as a moving picture.

 
 

Finance (No.2) Bill
Part 3 — Income tax, corporation tax and capital gains tax
Chapter 3 — Films and sound recordings

29

 

(2)   

For the purposes of this Chapter each part of a series of films is treated as a

separate film, unless—

(a)   

the films form a series with not more than 26 parts,

(b)   

the combined playing time is not more than 26 hours, and

(c)   

the series constitutes a self-contained work or is a series of

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documentaries with a common theme,

   

in which case the films are treated as a single film.

(3)   

References in this Chapter to a film include the film soundtrack.

(4)   

For the purposes of this Chapter 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

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distributed for presentation to the general public.

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Meaning of “film production company”

(1)   

The following provisions have effect for the purposes of this Chapter as

regards the meaning of “film production company”.

(2)   

There cannot be more than one film production company in relation to a film.

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(3)   

A company that (otherwise than in partnership)—

(a)   

is responsible—

(i)   

for pre-production, principal photography and post production

of the film, and

(ii)   

for delivery of the completed film,

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(b)   

is actively engaged in production planning and decision-making

during pre-production, principal photography and post production,

and

(c)   

directly negotiates, contracts and pays for rights, goods and services in

relation to the film,

25

   

is the film production company in relation to the film.

(4)   

In relation to a qualifying co-production, a company that (otherwise than in

partnership)—

(a)   

is a co-producer, and

(b)   

makes an effective creative, technical and artistic contribution to the

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film,

   

is the film production company in relation to the film.

(5)   

If there is more than one company meeting the description in subsection (3) or

(4), the company that is most directly engaged in the activities referred to in

that subsection is the film production company in relation to the film.

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(6)   

If there is no company meeting the description in subsection (3) or (4), there is

no film production company in relation to the film.

33      

Meaning of “film-making activities” etc

(1)   

In this Chapter “film-making activities”, in relation to a film, means the

activities involved in development, pre-production, principal photography

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and post production of the film.

 
 

Finance (No.2) Bill
Part 3 — Income tax, corporation tax and capital gains tax
Chapter 3 — Films and sound recordings

30

 

(2)   

If all or any of the images in a film are generated by computer, references in this

Chapter to principal photography shall be read as references to, or as

including, the generation of those images.

(3)   

The Treasury may by regulations—

(a)   

amend subsections (1) and (2);

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(b)   

provide that specified activities are or are not to be regarded for the

purposes of this Chapter as film-making activities or as film-making

activities of a particular description;

(c)   

provide that, in relation to a specified description of film, references in

this Chapter to film-making activities of a particular description are to

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be read as references to such activities as may be specified.

   

“Specified” here means specified in the regulations.

(4)   

No such regulations shall be made unless a draft of the regulations has been

laid before and approved by a resolution of the House of Commons.

34      

Meaning of “production expenditure” and related expressions

15

(1)   

In this Chapter, in relation to a film—

“production expenditure” means expenditure on film-making activities in

connection with the film, and

“core expenditure” means production expenditure on pre-production,

principal photography and post production.

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(2)   

For the purposes of this Chapter a “limited-budget film” means a film whose

core expenditure is £20 million or less.

(3)   

In determining whether a film is a limited-budget film, any core expenditure

that—

(a)   

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

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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.

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(4)   

Section 839 of ICTA (connected persons) applies for the purposes of subsection

(3).

35      

Meaning of “UK expenditure”

(1)   

For the purposes of this Chapter “UK expenditure”, in relation to a film, means

expenditure on—

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(a)   

services performed in the United Kingdom, or

(b)   

goods supplied in the United Kingdom.

(2)   

Any apportionment of expenditure for the purposes of this Chapter as between

UK expenditure and non-UK expenditure shall be made on a fair and

reasonable basis.

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(3)   

The Treasury may by regulations amend subsection (1).

(4)   

No such regulations shall be made unless a draft of the regulations has been

laid before and approved by a resolution of the House of Commons.

 
 

 
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