Finance Bill 2002
New Clause 22
Mr Chancellor of the Exchequer
To move the following clause:-
'(1) Relief under section 48 of the Finance (No.2) Act 1997 (c.58) ( relief for expenditure on production or acquisition of film with total production expenditure of £15 million or less) in respect of acquisition expenditure is available only in relation to an acquisition-
(a) by the producer, or
(b) directly from the producer,
and not in relation to any subsequent acquisition (or in relation to any acquisition within paragraph (a) or (b) other than the first).
(2) For this purpose-
(a) "acquisition expenditure" means expenditure to which subsection (3) of section 42 of the Finance (No.2) Act 192 (c.48) applies (relief for acquisition expenditure);
(b) "acquisition" means acquisition of the master negative of a film or any master tape or master disc of a film, within the meaning of that section; and
(c) "the producer" means the person who commissions the making of the film and is entitled to control its exploitation.
(3) This section applies to any expenditure incurred on or after 30th June 2002.
For this purpose when expenditure is incurred shall be determined as for the purposes of section 48 of the Finance (No.2) Act 1997 (c.58) (see subsection (9) of that section).
EXPLANATORY NOTE
SUMMARY
1. The purpose of this clause is to prevent abuse by restricting the relief available under section 48 Finance (No. 2) Act 1997 on the acquisition of the master version of a film, to the first acquisition by the producer of the film and the first acquisition directly from the producer.
DETAILS OF THE CLAUSE
2. Subsection (1) provides that relief under section 48 Finance (No.2) Act 1997 on the acquisition of a film master version shall be limited to the first acquisition by the producer and the first acquisition directly from the producer.
3. Subsection (2) defines "acquisition expenditure", "acquisition" and "the producer".
4. Subsection (3) applies the change to acquisition expenditure incurred on or after 30th June 2002. It specifies that the rules for determining the time when expenditure is incurred shall be those pertaining to Section 48 generally.
BACKGROUND
5. Section 48 Finance (No.2) Act 1997 ("Section 48 relief") allows expenditure on the production or acquisition of British qualifying films with budgets of £15 million or less to be written off fully on completion. This relief was originally for expenditure incurred before 2 July 2000, but that has subsequently been extended, most recently by section 72 FA 2001, to 2 July 2005
6. In practice the producers generally access the relief via a sale and leaseback, or similar arrangement with a third party. The third party claims the relief on the acquisition of the master and, in effect, a proportion of the relief is fed back to the producer via the leasing structure.
7. Relief on the acquisition of a film is limited to the total production expenditure of the film, whenever and by whoever incurred.
8. The object of the clause is to prevent abuse of the relief arising from the setting up of a chain of acquisitions whose sole purpose is to entitle each acquirer to claim relief on a sum equal to the total production expenditure of the film.