Finance Act, 1987

Relief for investment in films.

35.—(1) In this section—

“allowable investor company” means, in relation to a qualifying company, a company which is not connected with the qualifying company;

“film” means a film which is produced—

(a) on a commercial basis with a view to the realisation of profit, and

(b) wholly or principally for exhibition to the public in cinemas or by way of television broadcasting,

but does not include a film made for exhibition as an advertising programme or as a commercial;

“qualifying company” means a company which—

(a) is incorporated in the State, and

(b) is resident in the State and is not resident elsewhere, and

(c) exists solely for the purposes of the production and distribution of a qualifying film or qualifying films;

“qualifying film” means a film in respect of which not less than 75 per cent. of the work on the production of the film is carried out in the State and not more than 60 per cent. of the cost of the production of the film is met by relevant investments;

“qualifying period” means the period commencing on the date of the passing of this Act and ending on the third anniversary of that date;

“relevant investment” means a sum of money which is—

(a) paid in a qualifying period to a qualifying company, whether in respect of shares in that qualifying company or otherwise, by an allowable investor company on its own behalf, and

(b) paid by such allowable investor company for the purpose of enabling the qualifying company to produce a qualifying film, and

(c) used by the qualifying company, within two years of the receipt of that sum, for that purpose,

but does not include a sum of money paid to the qualifying company on terms that it will be repaid, and a reference to the making of a relevant investment shall be construed as a reference to the payment of such a sum to a qualifying company.

(2) Subject to the provisions of this section, where, in an accounting period, an allowable investor company makes a relevant investment, it shall, on due claim and on proof of the facts, be given a deduction of the amount of that investment from its total profits for the accounting period:

Provided that, where the amount of the deduction to which the allowable investor company is entitled under this section in an accounting period exceeds its profits for that accounting period, the excess shall be carried forward to the succeeding accounting period and the amount so carried forward shall be treated for the purposes of this section, other than subsection (3), as if it were a relevant investment made in that succeeding accounting period.

(3) Where, in any period of twelve months ending on an anniversary of the passing of this Act, the amount, or the aggregate amount of the relevant investments made by an allowable investor company, or by such company and all companies which, at any time in that period, would be regarded as connected with such company, exceeds £100,000, no relief shall be given under this section for the excess and, where there is more than one such relevant investment, the inspector, or, on appeal, the Appeal Commissioners, shall make such apportionment of the relief available as shall be just and reasonable to allocate to each relevant investment a due proportion of the relief available and, where necessary, to grant to each allowable investor company concerned an amount of relief proportionate to the amount of the relevant investment or the aggregate amount of the relevant investments made by it in the period.

(4) A claim to relief under this section may be allowed at any time after the payment of a sum to a qualifying company, which, if it is used, within two years of its being paid, by the qualifying companyfor the production of a qualifying film, will be a relevant investment, if the inspector is satisfied that all the conditions for relief are, or will be, satisfied, but the relief shall be withdrawn if, by reason of the happening of any subsequent event or the failure of an event to happen which at the time the relief was given was expected to happen, it appears that the company making the claim was not entitled to the relief allowed.

(5) An allowable investor company shall not be entitled to relief in respect of a relevant investment unless it is established to the satisfaction of the inspector, or, on appeal, of the Appeal Commissioners, that the relevant investment—

(a) has been made for bona fide commercial purposes and not as part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax,

(b) that the relevant investment has been, or will be, used in the production of a qualifying film, and

(c) the relevant investment is made at the risk of the company and neither the company nor any person who would be regarded as connected with the company, is entitled to receive, directly or indirectly, any payment from the qualifying company other than a payment made on an arm's length basis for goods or services supplied or a payment out of the proceeds of exploiting the film to which the company is entitled under the terms subject to which the relevant investment is made.

(6) Where any relief has been given under this section which is subsequently found not to have been due, it shall be withdrawn by making an assessment to corporation tax under Case IV of Schedule D for the accounting period or accounting periods in which the relief was given, and, notwithstanding anything in the Tax Acts, such an assessment may be made at any time.

(7) (a) Subject to paragraph (b), where an allowable investor company is entitled to relief under this section in respect of any sum, or any part of a sum, or would be so entitled on making due claim, as a deduction from its total profits for any accounting period, it shall not be entitled to any relief for that sum, or any part of a sum, in computing its income or profits, or as a deduction from its income or profits, for any accounting period under any other provision of the Corporation Tax Acts or the Capital Gains Tax Acts.

(b) Where an allowable investor company has made a relevant investment by way of a subscription for new ordinary shares of a qualifying company, and none of those shares are disposed of by the allowable investor company within three years of their acquisition by that company, then the sums allowable as deductions from the consideration in the computation for the purpose of capital gains tax of the gain or loss accruing to the company on the disposal of those shares shall be determined without regard to any relief under this section which the company has obtained, or would be entitled on due claim to obtain, except that where those sums exceed the consideration they shall be reduced by the amount equal to—

(i) the amount in respect of which the allowable investor, company has obtained relief under this section in respect of the subscription for those shares, of

(ii) the amount of the excess,

whichever is the less.

(c) For the purposes of this subsection “new ordinary shares” means new ordinary shares forming part of the ordinary share capital of a qualifying company which, throughout the period of three years commencing on the date such shares are issued, carry no present or future preferential right to dividends, or to a company's assets on its winding up, and no present or future preferential right to be redeemed.

(8) Section 157 of the Corporation Tax Act, 1976 , shall apply for the purposes of this section.