Supplementary
1190Income from the film
(1)References in this Chapter to income from the film are to any receipts by the company in connection with the making or exploitation of the film.
(2)This includes—
(a)receipts from the sale of the film or rights in it,
(b)royalties or other payments for use of the film or aspects of it (for example, characters or music),
(c)payments for rights to produce games or other merchandise, and
(d)receipts by the company by way of a profit share agreement.
(3)Receipts that (apart from this subsection) would be regarded as of a capital nature are treated as being of a revenue nature.
1191Costs of the film
(1)References in this Chapter to the costs of the film are to expenditure incurred by the company on—
(a)film-making activities in connection with the film, or
(b)activities with a view to exploiting the film.
(2)This is subject to any provision of the Corporation Tax Acts prohibiting the making of a deduction, or restricting the extent to which a deduction is allowed, in calculating the profits of a trade.
(3)Expenditure that (apart from this subsection) would be regarded as of a capital nature only because it is incurred on the creation of an asset (the film) is treated as being of a revenue nature.
1192When costs are taken to be incurred
(1)For the purposes of this Chapter costs are incurred when they are represented in the state of completion of the work in progress.
(2)Accordingly—
(a)payments in advance of work to be done are ignored until the work has been carried out, and
(b)deferred payments are recognised to the extent that the work is represented in the state of completion.
(3)The costs incurred on the film are taken to include an amount that has not been paid only if it is the subject of an unconditional obligation to pay.
(4)If an obligation is linked to income being earned from the film, no amount is to be brought into account in respect of the costs of the obligation unless an appropriate amount of income is or has been brought into account.
1193Pre-trading expenditure
(1)This section applies if, before the company began to carry on the separate film trade, it incurred expenditure on development of the film.
(2)The expenditure may be treated as expenditure of the separate film trade and as if incurred immediately after the company began to carry on that trade.
(3)If expenditure so treated has previously been taken into account for other tax purposes, the company must amend any relevant company tax return accordingly.
(4)Any amendment or assessment necessary to give effect to subsection (3) may be made despite any limitation on the time within which an amendment or assessment may normally be made.
1194Estimates
Estimates for the purposes of this Chapter must be made as at the balance sheet date for each period of account, on a just and reasonable basis taking into consideration all relevant circumstances.