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HMRC internal manual

Business Income Manual

Films and sound recordings: master versions of sound recordings: revenue nature of income and expenditure

S130, S134 Income Tax (Trading and Other Income) Act 2005, S150, S152 Corporation Tax Act 2009

Expenditure on the production or acquisition of the original master version of a sound recording is generally capital in nature because it is incurred on the provision of a fixed asset. For Income Tax and Corporation Tax purposes, however, such expenditure is deemed to be expenditure of a revenue nature.

The term ‘original master version’ of a sound recording means the master tape or master audio disc of the recording and also includes any rights in the master version that are acquired with it. Film soundtracks are excluded.

What is meant by expenditure on the production or acquisition of an original master version is explained at BIM56206.

As the expenditure is deemed to be revenue in nature, any receipts from the exploitation of the master version are treated by the legislation as being receipts of a revenue nature.

This applies to sums received not only from the disposal of the master version but also to sums arising from disposals of any interest or right in or over the master version. This includes any interest or right created by the disposal and any insurance, compensation or similar sums derived from the master version. It will also include any disposal which is part of a larger disposal.


The owner of the master version of a sound recording grants an exclusive licence for 10 years to an American company in respect of the exploitation rights of the recording in the USA and Canada. The owner receives a single payment of £2million. The receipt is a revenue receipt for tax purposes irrespective of its true nature.