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Capital Allowances |
35 |
would be trading stock of the trader.324 If the film is not only a qualifying film but cost £15 m or less to make, the whole expenditure can be written off in 1 year and not spread over three;325 this provision has a sunset clause in that it does not apply to expenditure after 1 July 2002, now extended to 2005.326 |
Thirdly, under the rules just shifted from the CAA legislation, all expenditure on the production or acquisition of a master version of a film is to be treated as revenue expenditure327—unless an opt out election is made.328 As a corollary, any sums received for the disposal of the master are also treated as revenue receipts. The master may take the form of a negative, tape or audio disc.329 Further rules allocate these sums to particular periods.330 However this right to opt out of revenue treatment only applies if, inter alia, the value of the master version is expected to be realisable over a period of not more than 2 years.331 The effect of the opt out is to take the film out of all three sets of rules just considered—not just the third and leaves the taxpayer with a Plant and Machinery writing down allowance of the appropriate sort. |
FA 2002 makes further changes with regard to the rule on films. First,332 remembering the original purpose of the reliefs, they are only to be available for expenditure on films intended for exhibition to the paying public at commercial cinemas (and so not on video or internet) and there should be an intention that a significant proportion of film earnings should come from such exhibitions. There are some interesting transitional rules, one of which requires a definition of the word ‘drama’, which is defined by exclusion. The reliefs concerned are those in F (No 2) A 1992 sections 40D, 41 and 42 and FA (No 2) 1997, section 48. |
Sections 100 and 101 are concerned with F No 2A 1997, section 48 expenditure on qualifying British films and costing not more than £15 m. By section 48(6A) added by FA 2002, section 100 expenditure which has not been paid can no longer qualify. Section 101 is concerned with successive acquisitions of the same film—and limits relief to sums paid for the first acquisition from the producer. |
24A.2.15 Anti-Avoidance: Relevant Transactions, Finance Leases and Leasebacks |
| The provisions on Plant and Machinery contain rules to deal with certain avoidance situations. The rules generally remove any right to a first year allowance and restrict the right to a writing down allowance.333 |
| The first restrictions are aimed at ‘relevant transactions,’ broadly sales, hire purchase and assignments of right under contracts.334 They are to apply if there is a relevant transaction (a) between connected persons, (b) from which it appears that the sole or main benefit which might otherwise have been expected to accrue to the parties was the obtaining of the allowance or |