Finance (No. 2) Act 1992

Business expansion scheme U.K.

F1 38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

Textual Amendments

F1 S. 38 repealed (3.5.1994 with effect in relation to shares issued on or after 1.1.1994) by 1994 c. 9, s. 258, Sch. 26 Pt. V(17), Note

F2 39 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

Textual Amendments

F2 S. 39 repealed (3.5.1994 with effect in relation to shares issued on or after 1.1.1994) by 1994 c. 9, s. 258, Sch. 26 Pt. V(17), Note

F3 40 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

Textual Amendments

F3 S. 40 repealed (3.5.1994 with effect in relation to shares issued on or after 1.1.1994) by 1994 c. 9, s. 258, Sch. 26 Pt. V(17), Note

40A F4 Revenue nature of expenditure on master versions of films U.K.

(1) Expenditure incurred on the production or acquisition of [F5 the original master] version of a film is to be regarded for [F6 corporation tax purposes] as expenditure of a revenue nature unless an election under section 40D below [F7 or section 143 of ITTOIA 2005 (corresponding income tax provision)] has effect with respect to it.

(2) If expenditure on [F8 the original master] version of a film is regarded as expenditure of a revenue nature under subsection (1) above, sums received from the disposal of [F8 the original master] version are to be regarded for [F9 corporation tax purposes] as receipts of a revenue nature (if they would not be so regarded apart from this subsection).

(3) For the purposes of subsection (2) above sums received from the disposal of [F10 the original master] version of a film include—

(a) sums received from the disposal of any interest or right in or over [F11 the original master] version, including an interest or right created by the disposal, and

(b) insurance, compensation or similar money derived from [F11 the original master] version.

(4) In this section—

(a) “expenditure of a revenue nature” means expenditure which, if it were incurred in the course of a trade the profits of which are chargeable to [F12 corporation] tax under Case I of Schedule D, would be taken into account for the purpose of computing the profits or losses of the trade, and

(b) “receipts of a revenue nature” means receipts which, if they were receipts of such a trade, would be taken into account for that purpose.

F13 (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F4 S. 40A inserted (22.3.2001 with effect as mentioned in s. 579(1) of the amending Act) by 2001 c. 2, ss. 578, 579(1), Sch. 2 para. 82

F5 Words in s. 40A(1) substituted (retrospective to 2.12.2004) by Finance Act 2005 (c. 7), Sch. 3 paras. 18(2), 31(3)

F6 Words in s. 40A(1) substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 453(2)(a) (with Sch. 2)

F7 Words in s. 40A(1) inserted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 453(2)(b) (with Sch. 2)

F8 Words in s. 40A(2) substituted (retrospective to 2.12.2004) by Finance Act 2005 (c. 7), Sch. 3 paras. 18(3), 31(3)

F9 Words in s. 40A(2) substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 453(3) (with Sch. 2)

F10 Words in s. 40A(3) substituted (retrospective to 2.12.2004) by Finance Act 2005 (c. 7), Sch. 3 paras. 18(4)(a), 31(3)

F11 Words in s. 40A(3) substituted (retrospective to 2.12.2004) by Finance Act 2005 (c. 7), Sch. 3 paras. 18(4)(b), 31(3)

F12 Word in s. 40A(4)(a) inserted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 453(4) (with Sch. 2)

F13 S. 40A(5) repealed (retrospective to 2.12.2004) by Finance Act 2005 (c. 7), Sch. 3 paras. 18(5), 31(3), Sch. 11 Pt. 2(3)

40B F14 Allocation of expenditure to periods U.K.

(1) In computing the profits or gains accruing to any [F15 company within the charge to corporation tax] from a trade or business which consists of or includes the exploitation of [F16 original] master versions of films, expenditure which is—

(a) incurred on the production or acquisition of [F17 the original master] version of a film, and

(b) expenditure of a revenue nature (whether as a result of section 40A above or otherwise),

must be allocated to relevant periods in accordance with this section.

(2) Subsection (1) above does not apply if an election under section 40D below [F18 or section 143 of ITTOIA 2005] has effect with respect to the expenditure.

(3) In this section “relevant period” means—

(a) a period for which the accounts of the trade or business concerned are made up, or

(b) if no accounts of the trade or business concerned are made [F19 up for a period, the accounting period of the company.]

(4) The amount of expenditure falling within subsection (1) above which falls to be allocated to any relevant period is so much as is just and reasonable, having regard to—

(a) the amount of that expenditure which remains unallocated at the beginning of that period,

(b) the proportion which the estimated value of [F20 the original master] version of the film which is realised in that period (whether by way of income or otherwise) bears to the aggregate of the value so realised and the estimated remaining value of [F20 the original master] version at the end of that period, and

(c) the need to bring the whole of the expenditure falling within subsection (1) above into account over the time during which the value of [F20 the original master] version is expected to be realised.

(5) In addition to any expenditure which is allocated to a relevant period in accordance with subsection (4) above, if a claim is made, there must also be allocated to that period so much of the unallocated expenditure as is specified in the claim and does not exceed the difference between—

(a) the amount allocated to that period in accordance with subsection (4) above, and

(b) the value of [F21 the original master] version of the film which is realised in that period (whether by way of income or otherwise).

(6) A claim under subsection (5) above must be [F22 made not later than two years after the end of the relevant period to which the claim relates.]

(7) In subsection (5) above “the unallocated expenditure”, in relation to a relevant period, is any expenditure falling within subsection (1) above—

(a) which does not fall to be allocated to that period in accordance with subsection (4) above, and

(b) which has not been allocated to any earlier relevant period in accordance with subsection (4) or (5) above [F23 or section 135 of ITTOIA 2005 (income tax provision corresponding to this section)] .

Textual Amendments

F14 S. 40B inserted (22.3.2001 with effect as mentioned in s. 579(1) of the amending Act) by 2001 c. 2, ss. 578, 579(1), Sch. 2 para. 82

F15 Words in s. 40B(1) substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 454(2) (with Sch. 2)

F16 Word in s. 40B(1) inserted (retrospective to 2.12.2004) by Finance Act 2005 (c. 7), Sch. 3 paras. 19(2)(a), 31(3)

F17 Words in s. 40B(1)(a) substituted (retrospective to 2.12.2004) by Finance Act 2005 (c. 7), Sch. 3 paras. 19(2)(b), 31(3)

F18 Words in s. 40B(2) inserted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 454(3) (with Sch. 2)

F19 Words in s. 40B(3)(b) substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 454(4) (with Sch. 2)

F20 Words in s. 40B(4) substituted (retrospective to 2.12.2004) by Finance Act 2005 (c. 7), Sch. 3 paras. 19(3), 31(3)

F21 Words in s. 40B(5) substituted (retrospective to 2.12.2004) by Finance Act 2005 (c. 7), Sch. 3 paras. 19(3), 31(3)

F22 Words in s. 40B(6) substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 454(5) (with Sch. 2)

F23 Words in s. 40B(7)(b) inserted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 454(6) (with Sch. 2)

Modifications etc. (not altering text)

C1 S. 40B applied (with modifications) (22.3.2001 with effect as mentioned in s. 579(1) of the amending Act) by 2001 c. 2, s. 579, Sch. 3 Pt. XIII para. 116

C2 S. 40B modified (retrospective to 2.12.2004) by Finance Act 2005 (c. 7), s. 62(3)(12)

C3 S. 40B modified (retrospective to 2.12.2004) by Finance Act 2005 (c. 7), s. 60(3)(10)

40C F24 Cases where section 40B does not apply U.K.

(1) To the extent that a deduction has been made in respect of any expenditure for a relevant period under section 42 below [F25 or under any of sections 138 to 140 of ITTOIA 2005 (corresponding income tax provisions)] —

(a) that expenditure must not be allocated under section 40B above, and

(b) no other expenditure incurred on the production or acquisition of [F26 the original master] version of the film is to be allocated under section 40B above to the relevant period.

(2) Section 40B above does not apply to the profits of a trade in which [F26 the original master] version of the film constitutes trading stock, as defined by section 100(2) of the Taxes Act 1988.

Textual Amendments

F24 S. 40C inserted (22.3.2001 with effect as mentioned in s. 579(1) of the amending Act) by 2001 c. 2, ss. 578, 579(1), Sch. 2 para. 82

F25 Words in s. 40C(1) inserted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 455 (with Sch. 2)

F26 Words in s. 40C substituted (retrospective to 2.12.2004) by Finance Act 2005 (c. 7), Sch. 3 paras. 20, 31(3)

Modifications etc. (not altering text)

C4 S. 40C applied (with modifications) (22.3.2001 with effect as mentioned in s. 579(1) of the amending Act) by 2001 c. 2, s. 579, Sch. 3 Pt. XIII para. 116

40D F27 Election for sections 40A and 40B not to apply U.K.

(1) Sections 40A and 40B above do not apply to expenditure—

(a) in relation to which an election is made under this section [F28 or under section 143 of ITTOIA 2005], and

(b) which meets the conditions in subsection (2) below.

(2) The conditions are that—

(a) the expenditure is incurred—

(i) by [F29 a company within the charge to corporation tax carrying] on a trade or business which consists of or includes the exploitation of [F30 original] master versions of films, and

(ii) on the production or acquisition of [F31 the original master] version of a film,

(b) [F32 the original master] version is certified by the Secretary of State under paragraph 3 of Schedule 1 to the Films Act 1985 as a qualifying film, tape or disc for the purposes of this section, and

(c) the value of [F33 the original master] version is expected to be realisable over a period of not less than two years.

(3) An election under this section—

(a) must relate to all expenditure incurred (or to be incurred) on the production or acquisition of [F34 the original master] version in question,

(b) must be made by giving notice to the Inland Revenue, in such form as the Board of Inland Revenue may determine, and

(c) is irrevocable.

(4) Notice under subsection (3)(b) above must be [F35 given not later than two years after the end of the relevant period in which [F36 the original master] version of the film is completed.]

(5) In subsection (4) above “relevant period” has the same meaning as in section 40B above.

(6) For the purposes of subsection (4) above, [F37 the original master] version of a film is completed—

(a) at the time 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 public, or

(b) if the expenditure in question was incurred on the acquisition of [F37 the original master] version and it was acquired after the time mentioned in paragraph (a) above, at the time it was acquired.

(7) An election may not be made under this section in relation to expenditure on [F38 the original master] version of a film if a claim has been made in respect of any of that expenditure under section 41 or 42 below [F39 or any of that expenditure is deducted under any of sections 137 to 140 of ITTOIA 2005 (corresponding income tax provisions)] .

Textual Amendments

F27 S. 40D inserted (22.3.2001 with effect as mentioned in s. 579(1) of the amending Act) by 2001 c. 2, ss. 578, 579(1), Sch. 2 para. 82

F28 Words in s. 40D(1)(a) inserted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 456(2) (with Sch. 2)

F29 Words in s. 40D(2)(a)(i) substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 456(3) (with Sch. 2)

F30 Word in s. 40D(2)(a)(i) inserted (retrospective to 2.12.2004) by Finance Act 2005 (c. 7), Sch. 3 paras. 21(2)(a)(i), 31(3)

F31 Words in s. 40D(2)(a)(ii) substituted (retrospective to 2.12.2004) by Finance Act 2005 (c. 7), Sch. 3 paras. 21(2)(a)(ii), 31(3)

F32 Words in s. 40D(2)(b) substituted (retrospective to 2.12.2004) by Finance Act 2005 (c. 7), Sch. 3 paras. 21(2)(b), 31(3)

F33 Words in s. 40D(2)(c) substituted (retrospective to 2.12.2004) by Finance Act 2005 (c. 7), Sch. 3 paras. 21(2)(b), 31(3)

F34 Words in s. 40D(3)(a) substituted (retrospective to 2.12.2004) by Finance Act 2005 (c. 7), Sch. 3 paras. 21(3), 31(3)

F35 Words in s. 40D(4) substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 456(4) (with Sch. 2)

F36 Words in s. 40D(4) substituted (with effect in accordance with Sch. 3 para. 31(1) of the amending Act) by Finance Act 2005 (c. 7), Sch. 3 para. 21(3)

F37 Words in s. 40D(6) substituted (retrospective to 2.12.2004) by Finance Act 2005 (c. 7), Sch. 3 paras. 21(3), 31(3)

F38 Words in s. 40D(7) substituted (retrospective to 2.12.2004) by Finance Act 2005 (c. 7), Sch. 3 paras. 21(4), 31(3)

F39 Words in s. 40D(7) inserted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 456(5) (with Sch. 2)

Modifications etc. (not altering text)

C5 S. 40D applied (with modifications) (22.3.2001 with effect as mentioned in s. 579(1) of the amending Act) by 2001 c. 2, s. 579, Sch. 3 Pt. XIII paras. 116, 117

S. 40D restricted (24.7.2002 with application as mentioned in s. 99(3)-(6) of the amending Act) by 2002 c. 23, s. 99(1)(a)(2)(6)