Part 2

Trading income
Chapter 9

Trade profits: . . . sound recordings

Introduction

Expenditure to which this Chapter applies
130
1
This Chapter makes provision about—
a
expenditure incurred on the production or acquisition of the original master version of a . . . sound recording, . . .
b. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2
In this Chapter references to production expenditure are to expenditure incurred on the production of the original master version of a . . . sound recording.
3
In this Chapter references to acquisition expenditure are to expenditure incurred on the acquisition of the original master version of a . . . 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 . . . 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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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.

Chapter not to apply where cash basis used
130A
Nothing in this Chapter applies in calculating the profits of a trade on the cash basis.

Meaning of “film” and related expressions
131. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Meaning of “original master version” and “certified master version”
132
1
In this Chapter “original master version” means—
a. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
b
in relation to a sound recording, the original master audio tape or disc.
2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Meaning of “relevant period”
133
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, ... a tax year.

Expenditure treated as revenue in nature

Expenditure treated as revenue in nature
134
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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Rules for allocating expenditure

Allocation of production or acquisition expenditure to relevant periods
135
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 . . . 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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
c. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
d. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Certified master versions: special rules for allocating expenditure

Application of provisions about certified master versions
136. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Certified master versions: preliminary expenditure
137. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Certified master versions: production expenditure
138. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Certified master versions: acquisition expenditure
138A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Certified master versions: limited-budget films

Certified master versions: production expenditure on limited-budget films
139. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Certified master versions: acquisition expenditure on limited-budget films
140. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Interpretation of sections 138 to 140

“Disqualifying deduction”
140A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

“Total production expenditure in respect of the original master version”
141. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

When expenditure is incurred
142. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred income agreements

Deferred income agreements which exist when deduction made
142A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Meaning of “deferred income agreement in respect of a film”
142B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred income agreements entered into after deduction made
142C. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Meaning of the “net excess relief”
142D. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Sections 142A to 142D: time of entry into an agreement
142E. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Election for sections 134 to 140 not to apply

Election for sections 134 to 140 not to apply
143. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Supplementary

Meaning of “genuinely intended for theatrical release”
144. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Words in s. 130(1)(a) repealed (with effect as mentioned in ss. 46, 47 of the repealing Act) by Finance Act 2006 (c. 25), s. 178, {Sch. 26 Pt. 3(4) Note 1}
S. 130(1)(b) and word repealed (with effect as mentioned in ss. 46, 47 of the repealing Act) by Finance Act 2006 (c. 25), s. 178, {Sch. 26 Pt. 3(4) Note 1}
Words in s. 130(2) repealed (with effect as mentioned in ss. 46, 47 of the repealing Act) by Finance Act 2006 (c. 25), s. 178, {Sch. 26 Pt. 3(4) Note 1}
Words in s. 130(3) repealed (with effect as mentioned in ss. 46, 47 of the repealing Act) by Finance Act 2006 (c. 25), s. 178, {Sch. 26 Pt. 3(4) Note 1}
Words in s. 130(4) repealed (with effect as mentioned in ss. 46, 47 of the repealing Act) by Finance Act 2006 (c. 25), s. 178, {Sch. 26 Pt. 3(4) Note 1}
130(6) repealed (with effect as mentioned in ss. 46, 47 of the repealing Act) by Finance Act 2006 (c. 25), s. 178, {Sch. 26 Pt. 3(4) Note 1}
S. 131 repealed (with effect as mentioned in ss. 46, 47 of the repealing Act) by Finance Act 2006 (c. 25), s. 178, {Sch. 26 Pt. 3(4) Note 1}
S. 132(1)(a) and following word repealed (with effect as mentioned in ss. 46, 47 of the repealing Act) by Finance Act 2006 (c. 25), s. 178, {Sch. 26 Pt. 3(4) Note 1}
S. 132(2)(3) repealed (with effect as mentioned in ss. 46, 47 of the repealing Act) by Finance Act 2006 (c. 25), s. 178, {Sch. 26 Pt. 3(4) Note 1}
S. 134(4) repealed (with effect as mentioned in ss. 46, 47 of the repealing Act) by Finance Act 2006 (c. 25), s. 178, {Sch. 26 Pt. 3(4) Note 1}
Words in s. 135(1)(a) repealed (with effect as mentioned in ss. 46, 47 of the repealing Act) by Finance Act 2006 (c. 25), s. 178, {Sch. 26 Pt. 3(4) Note 1}
S. 135(1)(d) repealed (with effect as mentioned in ss. 46, 47 of the repealing Act) by Finance Act 2006 (c. 25), s. 178, {Sch. 26 Pt. 3(4) Note 1}
S. 135(6)(b)-(d) repealed (with effect as mentioned in ss. 46, 47 of the repealing Act) by Finance Act 2006 (c. 25), s. 178, {Sch. 26 Pt. 3(4) Note 1}
S. 135(7) repealed (with effect as mentioned in ss. 46, 47 of the repealing Act) by Finance Act 2006 (c. 25), s. 178, {Sch. 26 Pt. 3(4) Note 1}
Ss.138, 138A substituted for s. 138 (with effect as mentioned in Sch. 3 para. 3(2)(3) of the amending Act) by Finance Act 2005 (c. 7), s. 59, Sch. 3 para. 3(1)(4)
S. 135 cross-heading substituted (with effect as mentioned in s. 46, 47 of the amending Act) by virtue of Finance Act 2006 (c. 25), s. 178, {Sch. 26 Pt. 3(4) Note 2(a)}
S. 135 heading substituted (with effect as mentioned in s. 46, 47 of the amending Act) by virtue of Finance Act 2006 (c. 25), s. 178, {Sch. 26 Pt. 3(4) Notes 1, 2(b)}
Ss. 136-144 repealed (with effect as mentioned in ss. 46, 47 of the repealing Act) by Finance Act 2006 (c. 25), s. 178, {Sch. 26 Pt. 3(4) Note 1}
Ss. 136-144 repealed (with effect as mentioned in ss. 46, 47 of the repealing Act) by Finance Act 2006 (c. 25), s. 178, {Sch. 26 Pt. 3(4) Note 1}
Ss. 136-144 repealed (with effect as mentioned in ss. 46, 47 of the repealing Act) by Finance Act 2006 (c. 25), s. 178, {Sch. 26 Pt. 3(4) Note 1}
Ss. 142A-142E and preceding cross-heading inserted (with effect as mentioned in s. 65(2) of the amending Act) by Finance Act 2005 (c. 7), s. 65(1)
S. 140A and preceding cross-heading inserted (with effect as mentioned in Sch. 3 para. 6(2)-(4) of the amending Act) by Finance Act 2005 (c. 7), Sch. 3 para. 6(1)
Ss. 136-144 repealed (with effect as mentioned in ss. 46, 47 of the repealing Act) by Finance Act 2006 (c. 25), s. 178, {Sch. 26 Pt. 3(4) Note 1}
Ss. 136-144 repealed (with effect as mentioned in ss. 46, 47 of the repealing Act) by Finance Act 2006 (c. 25), s. 178, {Sch. 26 Pt. 3(4) Note 1}
Ss. 136-144 repealed (with effect as mentioned in ss. 46, 47 of the repealing Act) by Finance Act 2006 (c. 25), s. 178, {Sch. 26 Pt. 3(4) Note 1}
Ss. 136-144 repealed (with effect as mentioned in ss. 46, 47 of the repealing Act) by Finance Act 2006 (c. 25), s. 178, {Sch. 26 Pt. 3(4) Note 1}
Ss. 136-144 repealed (with effect as mentioned in ss. 46, 47 of the repealing Act) by Finance Act 2006 (c. 25), s. 178, {Sch. 26 Pt. 3(4) Note 1}
Ss. 136-144 repealed (with effect as mentioned in ss. 46, 47 of the repealing Act) by Finance Act 2006 (c. 25), s. 178, {Sch. 26 Pt. 3(4) Note 1}
Ss. 136-144 repealed (with effect as mentioned in ss. 46, 47 of the repealing Act) by Finance Act 2006 (c. 25), s. 178, {Sch. 26 Pt. 3(4) Note 1}
Ss. 136-144 repealed (with effect as mentioned in ss. 46, 47 of the repealing Act) by Finance Act 2006 (c. 25), s. 178, {Sch. 26 Pt. 3(4) Note 1}
Ss. 136-144 repealed (with effect as mentioned in ss. 46, 47 of the repealing Act) by Finance Act 2006 (c. 25), s. 178, {Sch. 26 Pt. 3(4) Note 1}
Ss. 136-144 repealed (with effect as mentioned in ss. 46, 47 of the repealing Act) by Finance Act 2006 (c. 25), s. 178, {Sch. 26 Pt. 3(4) Note 1}
Ss. 136-144 repealed (with effect as mentioned in ss. 46, 47 of the repealing Act) by Finance Act 2006 (c. 25), s. 178, {Sch. 26 Pt. 3(4) Note 1}
Ss. 136-144 repealed (with effect as mentioned in ss. 46, 47 of the repealing Act) by Finance Act 2006 (c. 25), s. 178, {Sch. 26 Pt. 3(4) Note 1}
Pt. 2 Ch. 9: words in heading repealed (with effect as mentioned in ss. 46, 47 of the repealing Act) by Finance Act 2006 (c. 25), s. 178, {Sch. 26 Pt. 3(4) Note 1}
Ss. 136-144 repealed (with effect as mentioned in ss. 46, 47 of the repealing Act) by Finance Act 2006 (c. 25), s. 178, {Sch. 26 Pt. 3(4) Note 1}
S. 130A inserted (with effect in accordance with Sch. 4 paras. 56, 57 of the amending Act) by Finance Act 2013 (c. 29), Sch. 4 para. 25
Words in s. 133(b) omitted (6.4.2024 for the tax year 2024-25 and subsequent tax years) by virtue of Finance Act 2022 (c. 3), Sch. 1 paras. 12, 61(1)