Income Tax (Trading and Other Income) Act 2005

138 Certified master versions: production or acquisition expenditure

(1) This section applies if—

(a) the person carrying on the trade has incurred production or acquisition 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, and

(d) the film is genuinely intended for theatrical release.

(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.

(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—

• Calculation 1

  Calculate one-third of the total production or acquisition expenditure incurred by 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—

  (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 is capable of being, allocated under section 139 or 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).

• 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, 41 or 42 of F(No.2)A 1992.

(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 production or acquisition 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 or acquisition expenditure in respect of the original master version may be allocated to the relevant period under this section.