Annex 1: Minor changes in the law made by the Act: Change 38: Tax treatment of sound recordings: sections 130, 132 and 135
This change gives statutory effect to ESC B54 (tax relief on films, tapes and discs).
ESC B54 states:
“Notwithstanding section 113(2) of Finance Act 2000, master audiotapes or discs shall be deemed to be included in the definitions in section 68(2) of the Capital Allowances Act 1990. This ensures that treatment of the expenditure on production of master audio tapes or discs will continue to be treated as expenditure of a revenue nature.”
Section 130 and sections 132 to 135 rewrite sections 40A to 40D of F(No 2)A 1992. Sections 40A to 40D of F(No 2)A 1992 contain rules for the tax treatment of films other than films that are “qualifying films” as defined in section 43 of F(No 2)A 1992. These rules were previously in section 68 of the Capital Allowances Act 1990 and were inserted in F(No 2)A 1992 when the Capital Allowances Act 1990 was repealed by CAA.
Before FA 2000, section 68(2)(c) of the Capital Allowances Act 1990 defined “disc” for the purposes of section 68 of that Act as “an original master film disc or original master audio disc”. Section 113(2) of FA 2000 substituted a new definition of “film, tape or disc” (by reference to the definition of “film” in section 43 of F(No 2)A 1992).
Because the definitions in section 43 of F(No 2)A 1992 apply only to films - not to master audiotapes or discs - the effect of section 113(2) of FA 2000 is to exclude expenditure on master audiotapes or discs from relief under section 68 of the Capital Allowances Act 1990. This is not what was intended. So ESC B54 restores the position before section 113(2) of FA 2000.
Sections 130, 132 and 135 incorporate ESC B54 by referring to “sound recordings” in sections 130(1)(a),(2),(3) and (4), 132(1) and 135(1).
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.