European Commission Approves State Aid For Film Tax Relief Schemes

The European Commission has given State Aid approval to the new film tax relief schemes.
The UK Film Council said that new tax relief will mean that for films that cost up to £20 million, the Film Production Company (FPC) will be able to claim an enhanced deduction of 100% with a payable cash element of 25% of UK qualifying film production expenditure. While for films that cost over £20 million, the FPC will be able to claim an enhanced deduction of 80% with a payable cash element of 20% of UK qualifying film production expenditure.
Further information on the revised cultural test; guidance on how the test will work; and details of transitional arrangements have been published by the government at Cultural Test website.
The revised cultural test will come into force once it is approved by the House of Commons and House of Lords, on 1 January 2007.
According to the UK Film Council the effect of the changes from the previously published cultural test are as follows: the Cultural Content section has been 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. In addition a new section has been added, Cultural Contribution, to which 4 points have been allocated. The total number of points available is reduced to 31 but the required pass mark of 16 remains unchanged, subject to a ‘golden points’ rule as follows:
A film scoring all 15 of the points available in sections C, D and A4, and less than two points in section A1 and less than two points in section A2, must additionally obtain the points in section A3 to pass the cultural test. If a film scores two points in section A1 or two points in section A2, it will not require the additional points from section A3 in order to pass the test.
The DCMS revised Guidance on the cultural test which explains how it will work is provided at Test Guidance.
The DCMS has set up a special email address * to handle have any queries about the test.
HM Treasury has also published details of the transitional arrangements at Draft Guidance.
The UK Film Council note that Section 42 relief for films has been extended until 31 December to ensure that there is no gap in the provision of film tax incentives pending the full implementation of the new regime from 1 January 2007.
In order to qualify for relief, all films will have to pass the criteria set out by HM Treasury.
(SP)