Part 2Trading income
Chapter 9Trade profits: F1. . . sound recordings
Introduction
130Expenditure to which this Chapter applies
(1)
This Chapter makes provision about—
(a)
(b)
F3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2)
In this Chapter references to production expenditure are to expenditure incurred on the production of the original master version of a F4. . . sound recording.
(3)
In this Chapter references to acquisition expenditure are to expenditure incurred on the acquisition of the original master version of a F5. . . sound recording.
(4)
In this Chapter references to the original master version of a film or sound recording include any rights in the original master version of a F6. . . sound recording that are held or acquired with it.
(5)
In this Chapter references to production or acquisition expenditure do not include—
(a)
interest (as to which, see section 29), or
(b)
the incidental costs of obtaining finance (as to which, see sections 58 and 59).
(6)
F7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(7)
In this Chapter “any prohibitive rule” means any provision of the Income Tax Acts which—
(a)
prohibits a deduction from being made, or
(b)
restricts the extent to which it is allowed,
in calculating the profits of a trade.
F8130AChapter not to apply where cash basis used
Nothing in this Chapter applies in calculating the profits of a trade on the cash basis.
131Meaning of “film” and related expressions
F9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
132Meaning of “original master version” and “certified master version”
(1)
In this Chapter “original master version” means—
(a)
F10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b)
in relation to a sound recording, the original master audio tape or disc.
(2)
F11. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3)
F11. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
133Meaning of “relevant period”
In this Chapter “relevant period”, in relation to a trade, means—
(a)
a period of account of the trade, or
(b)
if no accounts of the trade are drawn up for a period, F12... a tax year.
Expenditure treated as revenue in nature
134Expenditure treated as revenue in nature
(1)
If a person carrying on a trade incurs production or acquisition expenditure, the expenditure is treated for income tax purposes as expenditure of a revenue nature.
(2)
If expenditure is treated under this section as revenue in nature, sums received by the person carrying on the trade from the disposal of the original master version—
(a)
are treated for income tax purposes as receipts of a revenue nature, and
(b)
are brought into account in calculating the profits of the trade of the relevant period in which they are received.
(3)
For this purpose sums received from the disposal of the original master version include—
(a)
sums received from the disposal of any interest or right in or over the original master version (including an interest or right created by the disposal), and
(b)
insurance, compensation or similar money derived from the original master version.
(4)
F13. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F14Rules for allocating expenditure
135F15Allocation of production or acquisition expenditure to relevant periods
(1)
This section applies for the purpose of calculating the profits of a trade of a relevant period if—
(a)
the trade consists of or includes the exploitation of the original master versions of F16. . . sound recordings,
(b)
the original master versions do not constitute trading stock of the trade (within the meaning of section 174),
(c)
the person carrying on the trade incurs production or acquisition expenditure in, or before, the relevant period, and
(d)
F17. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2)
A deduction is allowed for the amount of the production or acquisition expenditure allocated to the relevant period, but this is subject to the application of any prohibitive rule.
(3)
The person carrying on the trade must allocate to the relevant period so much of the expenditure as is just and reasonable (but see subsection (5)).
(4)
In making this allocation regard must be had to the following—
(a)
the amount of the expenditure which remains unallocated at the beginning of the period,
(b)
the amount of the expenditure incurred in the period,
(c)
the proportion which the estimated value of the original master version realised in the period (by way of income or otherwise) bears to the sum of the value so realised and the estimated remaining value at the end of the period, and
(d)
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 to be realised.
(5)
The person carrying on the trade may also allocate to the relevant period a further amount, so long as the total amount allocated to the period does not exceed the value of the original master version realised in the period (by way of income or otherwise).
(6)
Expenditure may not be allocated to the relevant period under this section if it is allocated—
(a)
under this section to any other relevant period,
(b)
F18. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(c)
F18. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(d)
F18. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(7)
F19. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certified master versions: special rules for allocating expenditure
136Application of provisions about certified master versions
F20. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
137Certified master versions: preliminary expenditure
F21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
138Certified master versions: production expenditure
F22. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F23138ACertified master versions: acquisition expenditure
F24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certified master versions: limited-budget films
139Certified master versions: production expenditure on limited-budget films
F25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
140Certified master versions: acquisition expenditure on limited-budget films
F26. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F27Interpretation of sections 138 to 140
140A“Disqualifying deduction”
F28. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
141“Total production expenditure in respect of the original master version”
F29. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
142When expenditure is incurred
F30. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F31Deferred income agreements
142ADeferred income agreements which exist when deduction made
F32. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
142BMeaning of “deferred income agreement in respect of a film”
F33. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
142CDeferred income agreements entered into after deduction made
F34. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
142DMeaning of the “net excess relief”
F35. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
142ESections 142A to 142D: time of entry into an agreement
F36. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Election for sections 134 to 140 not to apply
143Election for sections 134 to 140 not to apply
F37. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplementary
144Meaning of “genuinely intended for theatrical release”
F38. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .