23/11/2006

Yesterday, the European Commission has finally given its greenlight to the new UK tax incentives after months of negotiations that have led to a revision of the Cultural Test for British fims. The scheme has been approved until March 31 2012.

The ratification of the UK tax relief legislations by the European Commission is good news for the UK film sector which had been in a deadlock for several months. A year ago, the Cultural Test determining whether a film can qualify for the new UK tax incentives was submitted to the EC for State Aid clearance. But the Commission did not accept that the test, as passed by UK Parliament in April 2006, went far enough to satisfy the state aid requirements of European law and expressed concerns regarding the treatment of European co-productions in the new UK film tax incentives. It took therefore several months for the UK Government to rewrite its copy with the Commission to ensure that the revised test does meet those requirements which allow EU member states to subsidise commercial films for cultural purposes to protect open competition between member states.

Competition Commissioner Neelie Kroes said: “The Commission is satisfied that the revised UK film tax incentive scheme complies with the conditions set out in its Audiovisual Communication. We welcome the guidance published by the UK authorities which confirms that European co-productions can benefit from the scheme.”

The key changes to the Cultural Test are that the cultural Content has increased from 4 to 16 points , the Cultural Hubs section has been reduced from 15 to 3 points and the Cultural Practitioners section has been reduced from 13 to 8 points (see below for details). In addition, a new section has been added, Cultural Contribution, to which 4 points have been allocated. The total number of points for a film to qualify is reduced from 32 to 31 but the required pass mark of 16 is unchanged.

UK Film Minister Shaun Woodward said:“ This announcement is good news for the UK film industry. It marks the future for a successful, stable and sustainable film industry. We have a film framework which will deliver for both the industry and audiences alike.The film scheme will be good both for independent and large studio productions.”

See Revised Cultural Test:

	Revised Cultural Test	Revised points
A	Cultural Content
A1	Film set in the UK	4
A2	Lead characters British citizens or residents	4
A3	Film based on British subject matter or underlying material	4
A4	Original dialogue recorded mainly in English language	4
	Total Section A	16
B	Cultural Contribution
	Films contributes to the promotion, development or enhancement of British culture in the areas of cultural diversity, cultural heritage and creativity	4
	Total Section B	4
C	Cultural Hubs
C1	Studio and/or location shooting/ Visual Effects/ Special Effects	2
C2	Music Recording/Audio Post Production/Picture Post Production	1
	Total Section C	3
D	Cultural Practitioners
D1	Director	1
D2	Scriptwriter	1
D3	Producer	1
D4	Composer	1
D5	Lead Actors	1
D6	Majority of Cast	1
D7	Key Staff (lead cinematographer, lead production designer, lead costume designer, lead editor, lead sound designer, lead visual effects supervisor, lead hair and makeup supervisor)	1
D8	Majority of Crew	1
	Total Section D	8
	TOTAL ALL SECTIONS (pass mark 16)	31