Finance Bill 2002: EXPLANATORY NOTE
CLAUSE 99 FILMS: EXCLUSION OF DEFERMENTS FROM PRODUCTION EXPENDITURE
SUMMARY
1. This clause restricts the relief available for expenditure on the acquisition of British qualifying films with budgets not exceeding £15 million to production expenditure which, at the time the film is completed, has been paid or is unconditionally payable within the next four months.
DETAILS OF THE CLAUSE
2. Subsection (1) provides that Section 48 of the Finance(No.2) Act 1997, is to be amended.
3. Subsection (2) provides that subsection (6) of Section 48 ( which defines ?total production expenditure?, subject to subsection (7)), shall be subject to a new subsection (6A)
4. Subsection (3) inserts the new subsection (6A), which specifies that production expenditure shall not include any amount which, at the time the film is completed, is either not paid or is not unconditionally required to be paid within four months of the date the film is completed.
5. Subsection (4) provides that the changes will commence for films completed on or after 17 April 2002
BACKGROUND NOTE
6. Section 48 Finance (No.2 Act) 1997 ("Section 48 relief") allows expenditure on the production or acquisition of British qualifying films with budgets of £15million or less to be written off fully on completion. This relief originally applied to expenditure incurred between 2 July 1997 and 1 July 2000 inclusive. The latter date has subsequently been extended, most recently in Section 72 FA 2001 to 1 July 2005.
7. By virtue of section 48(3), the relief for expenditure on the acquisition of the master of a film cannot exceed the total production expenditure of that film. "Total production expenditure" is defined in section 48(6). Essentially it is all expenditure on the production of the film whenever incurred and whether or not incurred by the claimant.
8. The clause will restrict total production expenditure to amounts paid at the time the film is completed, or amounts remaining payable within normal commercial credit arrangements. It will put beyond doubt that total production expenditure does not include amounts of expenditure, payment of which is deferred until well after the film is completed and is contingent upon the film making sufficient income or profits.