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HMRC internal manual

Business Income Manual

HM Revenue & Customs
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Films and sound recordings: master versions of sound recordings: cost recovery method

S135 Income Tax (Trading and Other Income) Act 2005, S151 Corporation Tax Act 2009

The cost recovery method is one of the two methods which are permitted for writing-off revenue expenditure incurred on the production or acquisition of the master version of sound recordings.

The statutory provisions require the income matching method (BIM56215) to be applied first. An additional deduction is then made for the amount by which the income from exploitation of the master version in the accounting period exceeds the amount of expenditure deductible under that method. The amount deducted cannot exceed the outstanding unrelieved expenditure.

In practice, the rules simply permit a deduction equal to the income received until such time as the expenditure has been fully relieved. A calculation under the income matching method is not required.