|
| |
|
| |
38 | Films qualifying for film tax relief |
| |
A film qualifies for film tax relief if the conditions specified in the following |
| |
| |
(a) | section 39 (intended theatrical release), |
| 5 |
(b) | section 40 (British film), and |
| |
(c) | section 41 (UK expenditure). |
| |
39 | Conditions of relief: intended theatrical release |
| |
(1) | The film must be intended for theatrical release. |
| |
| 10 |
(a) | “theatrical release” means exhibition to the paying public at the |
| |
| |
(b) | a film is not regarded as intended for theatrical release unless it is |
| |
intended that a significant proportion of the earnings from the film |
| |
should be obtained by such exhibition. |
| 15 |
(3) | Whether this condition is met is determined for each accounting period of the |
| |
film production company during which film-making activities are carried on |
| |
in relation to the film, in accordance with the following rules. |
| |
(4) | If at the end of an accounting period the film is intended for theatrical release, |
| |
the condition is treated as having been met throughout that period (subject to |
| 20 |
| |
(5) | If at the end of an accounting period the film is not intended for theatrical |
| |
| |
(a) | is treated as having been not met throughout that period, and |
| |
(b) | cannot be met in any subsequent accounting period. |
| 25 |
| This does not affect any entitlement of the company to relief in an earlier |
| |
accounting period for which the condition was met. |
| |
40 | Conditions of relief: British film |
| |
The film must be certified by the Secretary of State as a British film under |
| |
Schedule 1 to the Films Act 1985 (c. 21). |
| 30 |
41 | Conditions of relief: UK expenditure |
| |
(1) | Not less than 25% of the core expenditure on the film incurred— |
| |
(a) | in the case of a British film other than a qualifying co-production, by the |
| |
| |
(b) | in the case of a qualifying co-production, by the co-producers, |
| 35 |
| |
(2) | The Treasury may by regulations amend the percentage specified in subsection |
| |
| |
(3) | 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. |
| 40 |
|
| |
|
| |
|
42 | Film tax relief: further provisions |
| |
(1) | Schedule 5 to this Act contains further provisions about film tax relief. |
| |
| |
Part 1 deals with entitlement to the relief; |
| |
Part 2 provides for the certification of British films for the purposes of the |
| 5 |
| |
Part 3 makes provision for claims for the relief; |
| |
Part 4 is about provisional entitlement to relief. |
| |
| |
43 | Films: restriction on use of losses while film in production |
| 10 |
(1) | This section applies to restrict the use that may be made of a film production |
| |
company’s trading loss for an accounting period before— |
| |
(a) | that in which the film is completed, or |
| |
(b) | where the company does not complete the film, that in which it |
| |
abandons film-making activities in relation to the film. |
| 15 |
(2) | A trading loss for such a period is not available for loss relief except to the |
| |
extent that it may be carried forward under section 393(1) of ICTA to be set |
| |
against profits of the same trade in a later period. |
| |
(3) | In this section “loss relief” includes any means by which a loss might be used |
| |
to reduce the amount in respect of which the film production company, or any |
| 20 |
other person, is chargeable to tax. |
| |
44 | Films: use of losses in later periods |
| |
(1) | This section applies— |
| |
(a) | to the accounting period— |
| |
(i) | in which the film is completed, or |
| 25 |
(ii) | if the film production company does not complete the film, in |
| |
which it abandons film-making activities in relation to the film, |
| |
| |
(b) | to any subsequent accounting period during which the trade continues. |
| |
(2) | Where a trading loss is carried forward to any such period under section 393(1) |
| 30 |
of ICTA from an earlier period in relation to which section 43 applied |
| |
(restriction on use of losses while film is in production), so much (if any) of the |
| |
loss as is not attributable to film tax relief may be treated for the purposes of |
| |
loss relief as if it were a loss incurred in the period to which it is carried |
| |
| 35 |
(3) | The amount of the trading loss for an accounting period to which this section |
| |
| |
(a) | set against other profits of the same or an earlier period under section |
| |
| |
(b) | surrendered as group relief under section 403 of that Act, |
| 40 |
| is restricted to the amount (if any) that is not attributable to film tax relief. |
| |
|
| |
|
| |
|
(4) | For the purposes of this section the amount of a trading loss in any period that |
| |
is attributable to film tax relief is calculated by deducting from the total amount |
| |
of the loss the amount there would have been if there had been no additional |
| |
deduction under Schedule 5 in that or any earlier period. |
| |
(5) | In this section “loss relief” includes any means by which a loss might be used |
| 5 |
to reduce the amount in respect of which the film production company, or any |
| |
other person, is chargeable to tax. |
| |
(6) | This section does not apply to a loss to the extent that it is carried forward or |
| |
surrendered under section 45 (terminal losses). |
| |
45 | Films: terminal losses |
| 10 |
(1) | This section applies where— |
| |
(a) | a film production company (“company A”) ceases to carry on a trade in |
| |
relation to a qualifying film, and |
| |
(b) | if the company had not ceased to carry on the trade, it could have |
| |
carried forward an amount under section 393(1) of ICTA 1988 to be set |
| 15 |
against profits of the same trade in a later period (the “terminal loss”). |
| |
(2) | If on cessation of the trade company A is carrying on a trade in relation to |
| |
another qualifying film, it may on making a claim elect that the terminal loss or |
| |
a part of it shall be treated as if it were a loss brought forward under section |
| |
393(1) to be set against profits of that other trade in the accounting period |
| 20 |
following that at the end of which the cessation takes place. |
| |
(3) | If on cessation of the trade carried on by company A there is another film |
| |
production company (“company B”) which— |
| |
(a) | is carrying on a trade in relation to a qualifying film (its “qualifying |
| |
| 25 |
(b) | is in the same group as company A for the purposes of Chapter 4 of Part |
| |
10 of ICTA (group relief), |
| |
| the whole or part of the terminal loss may be surrendered by company A to |
| |
| |
(4) | On the making of a claim by company B the amount surrendered shall be |
| 30 |
treated as if it were a loss brought forward by that company under section |
| |
393(1) to be set against the profits of its qualifying trade for the accounting |
| |
period of that company following that in which or at the end of which the |
| |
cessation takes place of the qualifying trade carried on by company A. |
| |
(5) | The Treasury may, in relation to the surrender of a loss under subsection (3) |
| 35 |
and the resulting claim under subsection (4), make provision by regulations |
| |
corresponding, subject to such adaptations or other modifications as appear to |
| |
them to be appropriate, to that made by Part 8 of Schedule 18 to FA 1998 |
| |
(company tax returns: claims for group relief). |
| |
| 40 |
(a) | references to the trade carried on by a film production company in |
| |
relation to a film are to the trade that it is treated as carrying on under |
| |
| |
(b) | references to a qualifying film are to a film that meets the conditions for |
| |
film tax relief (see section 38). |
| 45 |
|
| |
|
| |
|
Films: withdrawal of existing reliefs |
| |
46 | Films: withdrawal of existing reliefs (corporation tax) |
| |
(1) | Sections 40A to 40D of F(No.2)A 1992 (treatment of expenditure on production |
| |
or acquisition of film) do not apply— |
| |
(a) | to production expenditure on a film that commences principal |
| 5 |
photography on or after 1st April 2006; |
| |
(b) | to acquisition expenditure— |
| |
(i) | on a film that commences principal photography on or after 1st |
| |
| |
(ii) | that is incurred on or after 1st October 2007 on a film (whenever |
| 10 |
| |
(2) | Section 41 of that Act (preliminary expenditure) does not apply to expenditure |
| |
incurred after the date on which this Act is passed. |
| |
(3) | Section 42 of that Act and section 48 of F(No.2)A 1997 (special reliefs for British |
| |
| 15 |
(a) | to production expenditure on a film that commences principal |
| |
photography on or after 1st April 2006; |
| |
(b) | to acquisition expenditure— |
| |
(i) | on a film that commences principal photography on or after 1st |
| |
| 20 |
(ii) | that is incurred on or after 1st October 2007. |
| |
(4) | References in this section to expenditure on the acquisition of a film, or to sums |
| |
received from the disposal of a film, are to expenditure on the acquisition of, or |
| |
sums received from the disposal of, the original master version of the film. |
| |
| 25 |
(a) | “original master version” means the original negative, tape or disc; |
| |
(b) | references to the original master version of a film include the original |
| |
master version of the film soundtrack (if any); |
| |
(c) | references to the original master version include any rights in the |
| |
original master version that are held or acquired with it. |
| 30 |
47 | Films: withdrawal of existing reliefs (income tax) |
| |
(1) | Sections 134 and 135 of ITTOIA 2005 (treatment of expenditure on production |
| |
or acquisition of film) do not apply— |
| |
(a) | to production expenditure on a film that commences principal |
| |
photography on or after 1st April 2006; |
| 35 |
(b) | to acquisition expenditure— |
| |
(i) | on a film that commences principal photography on or after 1st |
| |
| |
(ii) | that is incurred on or after 1st October 2007 on a film (whenever |
| |
| 40 |
(2) | Section 137 of that Act (preliminary expenditure) does not apply to |
| |
expenditure incurred after the date on which this Act is passed. |
| |
(3) | Sections 138 to 144 of that Act (special reliefs for British films) do not apply— |
| |
|
| |
|
| |
|
(a) | to production expenditure on a film that commences principal |
| |
photography on or after 1st April 2006; |
| |
(b) | to acquisition expenditure— |
| |
(i) | on a film that commences principal photography on or after 1st |
| |
| 5 |
(ii) | that is incurred on or after 1st October 2007. |
| |
(4) | References in this section to expenditure on the acquisition of a film, or to sums |
| |
received from the disposal of a film, are to expenditure on the acquisition of, or |
| |
sums received from the disposal of, the original master version of the film. |
| |
| 10 |
(a) | “original master version” means the original negative, tape or disc; |
| |
(b) | references to the original master version of a film include the original |
| |
master version of the film soundtrack (if any); |
| |
(c) | references to the original master version include any rights in the |
| |
original master version that are held or acquired with it. |
| 15 |
Corporation tax treatment of sound recordings |
| |
48 | Sound recordings: revenue nature of expenditure |
| |
(1) | If a company carrying on a trade incurs expenditure on the production or |
| |
acquisition of the original master version of a sound recording, the expenditure |
| |
is treated for corporation tax purposes as expenditure of a revenue nature. |
| 20 |
(2) | If expenditure is treated under this section as revenue in nature, sums received |
| |
by the company from the disposal of the original master version of the sound |
| |
| |
(a) | are treated for corporation tax purposes as receipts of a revenue nature, |
| |
| 25 |
(b) | are brought into account in calculating the profits of the relevant period |
| |
in which they are received. |
| |
(3) | For this purpose sums received from the disposal of the original master version |
| |
| |
(a) | sums received from the disposal of any interest or right in or over the |
| 30 |
original master version (including an interest or right created by the |
| |
| |
(b) | insurance, compensation or similar money derived from the original |
| |
| |
49 | Sound recordings: allocation of expenditure |
| 35 |
(1) | This section applies in calculating for the purposes of corporation tax the |
| |
profits or losses of a company from a trade where— |
| |
(a) | the trade consists of or includes the exploitation of original master |
| |
versions of sound recordings, and |
| |
(b) | the original master versions do not constitute trading stock of the trade |
| 40 |
as defined by section 100(2) of ICTA. |
| |
| |
(a) | incurred on the production or acquisition of the original master version |
| |
of a sound recording, and |
| |
|
| |
|
| |
|
(b) | expenditure of a revenue nature (whether as a result of section 48 or |
| |
| |
| must be allocated to relevant periods in accordance with this section. |
| |
(3) | The company must allocate to a relevant period so much of the expenditure as |
| |
is just and reasonable having regard to— |
| 5 |
(a) | the amount of the expenditure that remains unallocated at the |
| |
| |
(b) | the proportion that the estimated value of the original master version |
| |
of the sound recording that is realised in that period (whether by way |
| |
of income or otherwise) bears to the aggregate of the value so realised |
| 10 |
and the estimated remaining value of the original master version at the |
| |
| |
(c) | the need to bring the whole of the expenditure into account over the |
| |
time during which the value of the original master version is expected |
| |
| 15 |
(4) | The company may also allocate to a relevant period a further amount, so long |
| |
as the total amount allocated does not exceed the value of the original master |
| |
version of the sound recording realised in that period (whether by way of |
| |
| |
50 | Sound recordings: interpretation |
| 20 |
For the purposes of sections 48 and 49 (corporation tax treatment of sound |
| |
| |
(a) | “sound recording” does not include a film soundtrack; |
| |
(b) | “original master version” means the master tape or master audio disc |
| |
| 25 |
(c) | references to the original master version of a sound recording include |
| |
any rights in the original master version that are held or acquired with |
| |
| |
(d) | “relevant period” means— |
| |
(i) | a period for which accounts of the trade are made up, or |
| 30 |
(ii) | if no accounts of the trade are made up for a period, an |
| |
accounting period of the company. |
| |
| |
51 | Corporation tax: films and sound recordings as intangible fixed assets |
| |
(1) | In Schedule 29 to FA 2002 (corporation tax: gains and losses from intangible |
| 35 |
fixed assets), for paragraph 80 (exclusion of films and sound recordings) |
| |
| |
“Assets excluded: certain films |
| |
80A (1) | This Schedule does not apply to an intangible fixed asset held by a |
| |
film production company to the extent that it represents production |
| 40 |
expenditure on a film to which Schedule 4 of the Finance Act 2006 |
| |
| |
| Expressions used in this sub-paragraph have the same meaning as in |
| |
Chapter 3 of Part 3 of the Finance Act 2006. |
| |
|
| |
|
| |
|
(2) | Except as regards royalties, this Schedule does not apply to an |
| |
intangible fixed asset held by a company to the extent that it |
| |
represents expenditure by the company— |
| |
(a) | on the production of the original master version of a film that |
| |
commenced principal photography before 1st April 2006; |
| 5 |
(b) | on the acquisition before 1st October 2007 of the original |
| |
master version of a film that commenced principal |
| |
photography before 1st April 2006. |
| |
(3) | In sub-paragraph (2)— |
| |
(a) | “film” has the same meaning as in Chapter 3 Part 3 of the |
| 10 |
| |
(b) | “original master version” means the original negative, tape or |
| |
| |
(c) | references to the original master version of a film include the |
| |
original master version of the film soundtrack (if any); |
| 15 |
(d) | references to the original master version include any rights in |
| |
the original master version that are held or acquired with it. |
| |
Assets excluded except as regards royalties: sound recordings |
| |
80B (1) | Except as regards royalties, this Schedule does not apply to an |
| |
intangible fixed asset held by a company to the extent that it |
| 20 |
represents expenditure by the company on the production or |
| |
acquisition of the master version of a sound recording. |
| |
| |
(a) | “sound recording” does not include a film soundtrack; |
| |
(b) | “master version” means master tape or master audio disc of |
| 25 |
| |
(c) | references to the master version include any rights in the |
| |
master version that are held or acquired with it.”. |
| |
(2) | In determining for the purposes of that Schedule whether an asset representing |
| |
production expenditure on a film was created before or after 1st April 2002, the |
| 30 |
asset shall be treated as created when the film was completed. |
| |
52 | Films: application of provisions to certain films already in production |
| |
(1) | The Treasury may make provision by regulations for the application of the |
| |
provisions of this Chapter, and of any enactment amended by this Chapter, in |
| |
relation to films that commenced principal photography before 1st April 2006 |
| 35 |
but are not completed before 1st January 2007. |
| |
(2) | The regulations may provide for such adaptations and modifications of the |
| |
provisions of this Chapter, of any enactment amended by this Chapter and of |
| |
any other provision of the Corporation Tax Acts, as appear to the Treasury |
| |
appropriate for that purpose. |
| 40 |
| |
(a) | provide that the provisions of this Chapter (or any specified provisions |
| |
of this Chapter) shall have effect as if they had been in force at all |
| |
| |
|
| |
|