Annex 1: Minor changes in the law made by the Act: Change 39: Treatment of interest in production and acquisition expenditure on films and sound recordings: section 130
This change clarifies the treatment of interest and the incidental costs of obtaining finance in calculating expenditure on the production and acquisition of films and sound recordings.
Sections 40A to 43 of F(No 2)A 1992, section 48 of F(No 2)A 1997 and sections 99 to 101 of FA 2002 contain special rules for the tax treatment of expenditure on the production and acquisition of films.
It has always been the Inland Revenue’s view that interest and the incidental costs of obtaining finance should be treated as the costs of borrowing money, not the costs of producing or acquiring the film. It follows that the normal rules for deducting such expenditure should apply, rather than the special rules for production or acquisition expenditure on films. The Inland Revenue understand from discussions and consultation with the film industry that the exclusion of interest etc from production costs is accepted industry practice.
Section 130(5) gives statutory effect to the practice of excluding interest etc from expenditure on the production or acquisition of a film or sound recording.
This change is in taxpayers' favour in principle. But it is expected to have no practical effect as it is in line with current practice.