Office of Public Sector Information
PART 2 continued CHAPTER 8 continued
(1) A herd basis election must specify the class of production herd to which it relates.
(2) A herd basis election must be made—
(a) on or before the first anniversary of the normal self-assessment filing date for the tax year in which the first relevant period of account ends, or
(b) if that is the tax year in which the farmer starts to carry on the trade and the farmer is not a firm, on or before the second anniversary of the normal self-assessment filing date for that tax year.
(3) “The first relevant period of account” means the first period of account in which the farmer making the election keeps a production herd of the class to which the election relates (but see subsection (8)).
(4) A herd basis election cannot relate to more than one class of production herd, but separate elections may be made for different classes.
(5) A herd basis election is irrevocable.
(6) A herd basis election has effect in relation to all production herds of the class to which it relates, including any which the farmer—
(a) has ceased to keep before making the election, or
(b) first keeps after making the election.
(7) A herd basis election has effect for every period of account in which the farmer—
(a) carries on the trade, and
(b) keeps a production herd of the class to which the election relates.
(8) If the farmer is a firm and there is a change in the persons who are partners in the firm—
(a) any herd basis election made by the old firm ceases to have effect, and
(b) in relation to the new firm, “the first relevant period of account” means the first period of account in which the new firm keeps a production herd of the class to which the election relates.
(1) This section applies if a farmer—
(a) keeps a production herd of a particular class, and
(b) ceases altogether to keep herds of that class for a period of at least 5 years.
(2) If the farmer keeps a production herd of that class after the end of that period—
(a) the period of account in which the farmer starts to keep the herd is treated as the first period of account in which the farmer keeps a production herd of that class, and
(b) any herd basis election previously made by the farmer in relation to production herds of that class ceases to have effect.
(1) This section applies if—
(a) the whole or a substantial part of a production herd kept by a farmer is slaughtered under a disease control order, and
(b) the circumstances of the slaughter are such that compensation is payable in respect of the animals slaughtered.
(2) The farmer may make a herd basis election in respect of the class of production herd involved in the slaughter as if the period of account —
(a) in which the compensation falls to be brought into account in calculating the profits of the trade, or
(b) in which it would (but for the election) fall to be so brought into account,
were the first period of account in which the farmer keeps a production herd of that class.
(3) An election made as a result of this section has effect for that period of account and every subsequent period of account in which the farmer—
(a) carries on the trade, and
(b) keeps a production herd of the class to which the election relates.
(4) In this section “disease control order” means an order made under the law relating to the diseases of animals by—
(a) central government,
(b) a devolved authority,
(c) a local authority, or
(d) another public authority.
(1) This section applies if—
(a) a person carrying on a trade (the “transferor”) transfers the whole or part of a production herd to another person (the “transferee”),
(b) the transfer is not by way of sale or is by way of sale but for a price other than that which the animals sold would have fetched if sold in the open market, and
(c) the control condition or herd basis benefit condition is met.
(2) The control condition is met if—
(a) the transferor is a body of persons over which the transferee has control,
(b) the transferee is a body of persons over which the transferor has control, or
(c) both the transferor and transferee are bodies of persons and another person has control over both of them.
(3) For this purpose “body of persons” includes a firm.
(4) The herd basis benefit condition is met if—
(a) the transferor or transferee (or both) might (but for this section) have been expected to obtain a herd basis benefit as a result of the transfer or the transactions of which the transfer is one, and
(b) the herd basis benefit is the sole or main benefit, or one of the main benefits, that the person in question might have been expected to obtain.
(5) For this purpose a “herd basis benefit” is a benefit resulting from—
(a) the obtaining of a right to make a herd basis election,
(b) the herd basis rules applying or not applying, or
(c) the herd basis rules having a greater or lesser effect.
(6) For the purpose of calculating the profits of—
(a) the trade carried on by the transferor, and
(b) any trade carried on by the transferee,
the animals transferred are treated as having been sold at the price which they would have fetched if sold in the open market.
(1) The Inland Revenue may by notice require the person carrying on a trade in relation to which a herd basis election is made to deliver a return of such information about—
(a) the animals kept for the purposes of the trade, and
(b) the products of those animals,
as may be required by the notice.
(2) The return must be delivered to the Inland Revenue within the time specified in the notice.
(1) If the herd basis rules apply in calculating the profits of a tax year after an assessment for that tax year has become final and conclusive, any assessment or repayment of tax that is necessary to give effect to the rules must be made.
(2) But repayment of tax is due only if a claim for it is made.
(1) This Chapter makes provision about—
(a) expenditure incurred on the production or acquisition of the original master version of a film or sound recording, and
(b) preliminary expenditure in relation to a film.
(2) In this Chapter references to production expenditure are to expenditure incurred on the production of the original master version of a film or sound recording.
(3) In this Chapter references to acquisition expenditure are to expenditure incurred on the acquisition of the original master version of a film or 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 film or 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) In this Chapter “preliminary expenditure”, in relation to a film, means expenditure which—
(a) can reasonably be said to have been incurred with a view to enabling a decision to be taken as to whether to make the film,
(b) is payable before the first day of principal photography (if the decision is to make the film), and
(c) is not repayable under a contract or other arrangement if the film is not made.
(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.
(1) In this Chapter “film” includes any record, however made, of a sequence of visual images which is capable of being used as a means of showing that sequence as a moving picture.
(2) For the purposes of this Chapter each part of a series of films is treated as a separate film.
(3) But if the Secretary of State has given a direction under paragraph 1(4) of Schedule 1 to the Films Act 1985 (c. 21) that parts of a series of films are to be treated as a single film for the purposes of that Schedule, they are also treated as a single film for the purposes of this Chapter.
(4) In this Chapter references to a film include the film soundtrack (if any).
(5) For the purposes of this Chapter a film is completed 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 general public.
(1) In this Chapter “original master version” means—
(a) in relation to a film, the original master negative, tape or disc, and
(b) in relation to a sound recording, the original master audio tape or disc.
(2) In this Chapter references to the original master version of a film include the original master version of the film soundtrack (if any).
(3) In this Chapter “certified master version”, in relation to a film, means an original master negative, tape or disc which is certified under paragraph 3 of Schedule 1 to the Films Act 1985 as a qualifying film, tape or disc for the purposes of this Chapter.
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, the basis period for a tax year.
(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) This section does not apply if an election under section 143 below or section 40D of F(No.2)A 1992 (corresponding corporation tax provision) has effect in relation to the expenditure.
(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 films or 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) no election under section 143 below or section 40D of F(No.2)A 1992 has effect in relation to the expenditure.
(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) under any other provision of this Chapter to the relevant period or any other relevant period,
(c) under section 40B of F(No.2)A 1992 (corporation tax provision corresponding to this section) to any other relevant period, or
(d) under section 41 of that Act (corporation tax provision corresponding to section 137 below) or 42 of that Act (corporation tax provision corresponding to sections 138 to 140 below) to the relevant period or any other relevant period.
(7) If any expenditure in respect of the original master version is allocated to the relevant period—
(a) under any other provision of this Chapter, or
(b) under section 41 or 42 of F(No.2)A 1992,
no other production or acquisition expenditure in respect of the original master version may be allocated to the relevant period under this section.
Sections 137 to 140 (certified master versions: certain expenditure) apply 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 films,
(b) the films do not constitute trading stock of the trade (within the meaning of section 174),
(c) the expenditure in question is of a revenue nature (whether as a result of section 134 or otherwise), and
(d) no election under section 143 below or section 40D of F(No.2)A 1992 has effect in relation to the expenditure.
(1) This section applies if—
(a) the person carrying on the trade has incurred preliminary expenditure in connection with a film in, or before, the relevant period,
(b) the certified master version condition is met (see subsection (2)), and
(c) the film is genuinely intended for theatrical release.
(2) The certified master version condition is—
(a) if the film is completed, that the original master version of it is a certified master version, or
(b) if the film is not completed, that it is reasonably likely that, if the film were completed, the original master version of it would be a certified master version.
(3) A deduction is allowed for the amount of the preliminary expenditure allocated to the relevant period, but this is subject to the application of any prohibitive rule.
(4) The person carrying on the trade may allocate up to 100% of the preliminary expenditure to the relevant period.
(5) But the total amount allocated under this section must not exceed 20% of the budgeted total expenditure on the film, calculated as at the first day of principal photography.
(6) Expenditure may not be allocated to the relevant period under this section if—
(a) it is allocated under this section to any other relevant period,
(b) it is allocated under any other provision of this Chapter to the relevant period or any other relevant period,
(c) it is allocated under section 41 of F(No.2)A 1992 to any other relevant period,
(d) it is allocated under section 40B or 42 of that Act to the relevant period or any other relevant period, or
(e) a deduction in respect of it has otherwise been made in calculating the profits of the trade for income or corporation tax purposes.
(7) If any preliminary expenditure in connection with the film is allocated to the relevant period—
(a) under section 135 above, or
(b) under section 40B of F(No.2)A 1992,
no other preliminary expenditure in connection with the film may be allocated to the relevant period under this section.
(8) So far as a deduction is given in respect of any expenditure—
(a) under this section, or
(b) under section 41 of F(No.2)A 1992,
no further deduction is allowed in respect of that expenditure in calculating the profits of the trade for income tax purposes.
(1) This section applies if—
(a) the person carrying on the trade has incurred production or acquisition expenditure in respect of the original master version of a film in, or before, the relevant period,
(b) the film was completed in, or before, that period,
(c) the original master version is a certified master version, and
(d) the film is genuinely intended for theatrical release.
(2) A deduction is allowed for the amount of the expenditure allocated to the relevant period, but this is subject to the application of any prohibitive rule.
(3) The person carrying on the trade may allocate up to the permissible amount of the expenditure to the relevant period.
(4) The permissible amount of the expenditure is the smallest amount given by the following calculations.
(5) The calculations are—
Calculation 1
Calculate one-third of the total production or acquisition expenditure incurred by the person in respect of the original master version (“the total expenditure”).
Calculation 2
Calculate one-third of the sum obtained by deducting from the total expenditure—
any amount of the total expenditure already allocated under section 137,
any amount of the total expenditure already allocated under section 41 of F(No.2)A 1992, and
any amount of the total expenditure that has already been, or is capable of being, allocated under section 139 or 140 below or under section 42 of F(No.2)A 1992 as applied by section 48(1) to (3) of F(No.2)A 1997 (corresponding corporation tax provision).
Calculation 3
Calculate so much of the total expenditure as has not already been allocated to the relevant period or any other relevant period—
under this section or any other provision of this Chapter, or
under any of sections 40B, 41 or 42 of F(No.2)A 1992.
(6) If the relevant period is less than 12 months the above references to one-third are to be read as references to a proportionately smaller fraction.
(7) If any production or acquisition expenditure in respect of the original master version is allocated to the relevant period—
(a) under section 135 above, or
(b) under section 40B of F(No.2)A 1992,
no other production or acquisition expenditure in respect of the original master version may be allocated to the relevant period under this section.
(1) This section applies if—
(a) the person carrying on the trade has incurred production expenditure in respect of the original master version of a film in, or before, the relevant period,
(b) the expenditure was incurred before 2nd July 2005 (see section 142 for timing rule),
(c) the original master version is a certified master version,
(d) the film is genuinely intended for theatrical release, and
(e) the total production expenditure in respect of the original master version is £15 million or less (see section 141).
(2) A deduction is allowed for the amount of the production expenditure allocated to the relevant period, but this is subject to the application of any prohibitive rule.
(3) The person carrying on the trade may allocate up to 100% of the production expenditure to the relevant period.
(4) Any expenditure which—
(a) has not been paid at the time the film is completed, and
(b) is not, at that time, the subject of an unconditional obligation to pay within 4 months after the date of completion,
is not regarded as production expenditure for the purposes of this section.
(5) 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) under any other provision of this Chapter to the relevant period or any other relevant period,
(c) under section 42 of F(No.2)A 1992 as applied by section 48(1) and (2) of F(No.2)A 1997 (corporation tax provision corresponding to this section) to any other relevant period, or
(d) under section 40B or 41 of F(No.2)A 1992, or section 42 of that Act (but not as applied by section 48(1) and (2) of F(No.2)A 1997), to the relevant period or any other relevant period.
(6) If any production expenditure in respect of the original master version is allocated to the relevant period—
(a) under section 135 above, or
(b) under section 40B of F(No.2)A 1992,
no other production expenditure in respect of the original master version may be allocated to the relevant period under this section.
(1) This section applies if—
(a) the person carrying on the trade has incurred acquisition expenditure in respect of the original master version of a film in, or before, the relevant period,
(b) the acquisition was a relevant acquisition (see subsection (2)),
(c) the expenditure was incurred before 2nd July 2005 (see section 142 for timing rule),
(d) the original master version is a certified master version,
(e) the film is genuinely intended for theatrical release, and
(f) the total production expenditure in respect of the original master version is £15 million or less (see section 141).
(2) An acquisition is a relevant acquisition if—
(a) the acquisition is by the producer and the producer has not previously acquired the original master version of the film, or
(b) the acquisition is directly from the producer and the original master version of the film has not previously been acquired directly from the producer,
and for this purpose “the producer” means the person who commissions the making of the film and is entitled to control its exploitation.
(3) A deduction is allowed for the amount of the acquisition expenditure allocated to the relevant period, but this is subject to the application of any prohibitive rule.
(4) The person carrying on the trade may allocate up to 100% of the acquisition expenditure to the relevant period.
(5) But the total amount allocated under this section may not exceed the total production expenditure in respect of the original master version.
(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) under any other provision of this Chapter to the relevant period or any other relevant period,
(c) under section 42 of F(No.2)A 1992 as applied by section 48(1) to (3) of F(No.2)A 1997 to any other relevant period, or
(d) under section 40B or 41 of F(No.2)A 1992, or section 42 of that Act (but not as applied by section 48(1) to (3) of F(No.2)A 1997), to the relevant period or any other relevant period.
(7) If any acquisition expenditure in respect of the original master version is allocated to the relevant period—
(a) under section 135 above, or
(b) under section 40B of F(No.2)A 1992,
no other acquisition expenditure in respect of the original master version may be allocated to the relevant period under this section.
(1) The following provisions of this section define what is meant by “the total production expenditure in respect of the original master version” for the purposes of sections 139 and 140.
(2) “The total production expenditure in respect of the original master version” means the total of all the production expenditure in respect of the original master version—
(a) whenever the expenditure is incurred, and
(b) whether or not it is incurred by the person carrying on the trade.
(3) Any expenditure which—
(a) has not been paid at the time the film is completed, and
(b) is not, at that time, the subject of an unconditional obligation to pay within 4 months after the date of completion,
is ignored.
(4) Any part of the production expenditure in respect of the original master version which—
(a) is incurred by a person under or as a result of a transaction entered into directly or indirectly between that person and a connected person, and
(b) might have been expected to have been of a greater amount (“the arm’s length amount”) if the transaction had been between independent persons dealing at arm’s length,
is treated as having been of an amount equal to the arm’s length amount.
Income Tax (Trading and Other Income) Act 2005