Finance Act 1986

4 For paragraph 2 of Schedule 4 to the Act of 1981 there shall be substituted the following paragraphs—

“2 A programme contractor's first category profits for an accounting period shall be ascertained in accordance with paragraph 2A and his second category profits for that accounting period shall be ascertained in accordance with paragraph 2B.

First category profits

2A (1) First category profits shall consist of the excess of relevant first category income over relevant first category expenditure.

(2) In this Schedule "relevant first category income" means—

(a) in relation to any programme contractor other than a DBS programme contractor or DBS teletext contractor, any income of his which is attributable to the provision by him of any programme for broadcasting on ITV, the Fourth Channel or a local sound broadcasting service (whether that programme is provided in the first place to the Authority or to any other person); and

(b) in relation to any DBS programme contractor or DBS teletext contractor, any income of his which is attributable to the provision by him to the Authority, in accordance with the terms of his contract as a DBS programme contractor or (as the case may be) DBS teletext contractor, of any programme for broadcasting in the Authority's DBS service to which his contract with the Authority relates.

(3) Without prejudice to the generality of sub-paragraph (2), "relevant first category income" includes—

(a) advertising receipts;

(b) income attributable directly or indirectly to any publication whose content (other than advertising) is wholly, or mainly, connected with programme schedules and scheduled programmes; and

(c) such part of any income which—

(i) accrues to any subsidiary of the programme contractor concerned; and

(ii) would be relevant first category income of that contractor if he and the subsidiary were a single programme contractor;

as, in the opinion of the Authority, should be attributed to the contractor as reflecting his financial interest in the subsidiary.

(4) In this Schedule "relevant first category expenditure" means any expenditure of the programme contractor concerned which is properly chargeable to revenue account and which is incurred in connection with the provision by him of—

(a) programmes of a kind mentioned in sub-paragraph (2)(a), in the case of a contractor who is not a DBS programme contractor or DBS teletext contractor; or

(b) programmes of a kind mentioned in sub-paragraph (2)(b), in the case of a DBS programme contractor or DBS teletext contractor.

(5) Without prejudice to the generality of sub-paragraph (4), "relevant first category expenditure" includes—

(a) expenditure in connection with the sale of rights to insert advertisements in programmes;

(b) expenditure in connection with any publication whose content (other than advertising) is wholly, or mainly, connected with programme schedules and scheduled programmes;

(c) such part of any expenditure which—

(i) is incurred by any subsidiary of the programme contractor concerned; and

(ii) would be relevant first category expenditure of that contractor if he and the subsidiary were a single programme contractor;

as, in the opinion of the Authority, should be attributed to the contractor as reflecting his financial interest in the subsidiary; and

(d) in the case of a DBS programme contractor or DBS teletext contractor, any expenditure incurred by him in connection with the provision of the satellite transponder.

(6) In ascertaining relevant first category income or relevant first category expenditure no account shall be taken of interest on any loan.

(7) Where relevant first category income consists of advertising receipts, it shall be attributed to accounting periods in accordance with the foregoing provisions of this Schedule and the same principle shall be followed in relating other items of relevant first category income, and items of relevant first category expenditure, to accounting periods.

(8) In this paragraph "programme" means—

(a) in the application of this Schedule in relation to the additional payments mentioned in section 32(1)b), a television programme; and

(b) in its application in relation to the additional payments mentioned in section 32(2)(b), a local sound broadcast.

Second category profits

2B (1) Second category profits shall consist of the excess of relevant second category income over relevant second category expenditure.

(2) In this Schedule "relevant second category income" means any income of the programme contractor concerned which is not relevant first category income but which accrues to him in connection (directly or indirectly) with the provision by him, for broadcasting, distribution or showing (whether or not within the United Kingdom)—

(a) in the case of a programme contractor other than a DBS programme contractor or DBS teletext contractor, of any programme provided by him for broadcasting on ITV, the Fourth Channel or a local sound broadcasting service, or intended by him to be so provided; or

(b) in the case of a DBS programme contractor or DBS teletext contractor, of any programme broadcast in the Authority's DBS service to which his contract with the Authority relates, or intended to be so broadcast.

(3) Without prejudice to the generality of sub-paragraph (2), "relevant second category income" includes any income which—

(a) accrues to any person connected with the programme contractor concerned; and

(b) would be relevant second category income of that contractor if he and that person were a single programme contractor.

(4) In this Schedule "relevant second category expenditure" means any expenditure properly chargeable to revenue account which is not relevant first category expenditure but which is incurred by the programme contractor concerned in connection (directly or indirectly) with the provision by him of any programme of a kind mentioned in sub-paragraph (2)(a) or (as the case may be) (b) above.

(5) Without prejudice to the generality of sub-paragraph (4) above, "relevant second category expenditure" includes any expenditure which—

(a) is incurred by any person connected with the programme contractor concerned; and

(b) would be relevant second category expenditure of that contractor if he and that person were a single programme contractor.

(6) In ascertaining relevant second category income or relevant second category expenditure no account shall be taken of interest on any loan.

(7) Items of relevant second category income and items of relevant second category expenditure shall be attributed to accounting periods in accordance with the foregoing provisions of this Schedule.

(8) In this paragraph "programme" means—

(a) in the application of this Schedule in relation to the additional payments mentioned in section 32(1)(b), a television programme; and

(b) in its application in relation to the additional payments mentioned in section 32(2)(b), a local sound broadcast.

Carry forward of certain losses

2C (1) Where, in any accounting period, the relevant first category expenditure of a programme contractor exceeds his relevant first category income sub-paragraph (3) shall apply.

(2) Where, in any accounting period, the relevant second category expenditure of a programme contractor exceeds his relevant second category income sub-paragraph (4) shall apply.

(3) Where this sub-paragraph applies—

(a) the excess shall, if the programme contractor has any relevant second category profits for the accounting period, be set against relevant second category income for that period as if the excess were relevant second category expenditure; and

(b) if any part of the excess then remains it shall be carried forward to the following accounting period and treated as relevant first category expenditure for that period.

(4) Where this sub-paragraph applies—

(a) the excess shall, if the programme contractor has any relevant first category profits for the accounting period, be set against relevant first category income for that period as if the excess were relevant first category expenditure; and

(b) if any part of the excess then remains it shall be carried forward to the following accounting period and treated as relevant second category expenditure for that period.

(5) When a programme contractor's contract with the Authority comes to an end, no losses incurred at any time during the currency of that contract may be carried forward under this paragraph and set against income attributable to any subsequent contract between him and the Authority.”