Finance Act 2005

62 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 a relevant period in respect of expenditure relating to the film (“the claim”).

(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.

(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) by the recovered amount (if any).

(5) The “amount of excess relief” is the amount given by the following formula—

where—

• D is the amount which there was an entitlement 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 date and ends with the final deferral date.

(6) The “recovered amount” means the total of—

(a) the amount (if any) treated under section 60 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 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 operative date.

(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 acquisition, and

(b) in any other case, the date upon which the film is completed.

(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 60,

(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 61),

(c) “previous relevant agreement” means a deferred income agreement in respect of the film concerned which was entered into by C after the 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 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.