Understanding the UK Cultural Test

Passing the so-called “Cultural Test” is a key step in qualifying for the UK tax credit and the forthcoming new iteration, the Audio-Visual Expenditure Credit.

But what exactly is the Cultural Test, and what requirements must a film or high-end TV (HETV) show meet in order to pass it?

What is the Cultural Test?

The Cultural Test is a set of requirements that determines whether a film or HETV show can be considered “culturally British.” There are four sections which can broadly be split in half:

• Sections A and B – what is seen on screen; and
• Sections C and D – who did the work and where it was done.

The Cultural Test for films and HETV shows has a total of 35 available points, with 18 needed to pass. Whether a production scrapes by with the minimum 18 points or easily scores a perfect 35 has no impact on the qualification; the test is a simple pass/fail exercise.

There is a common misconception that the Cultural Test has an impact on the value of the tax credit – this is not true. You must pass the Cultural Test to qualify for a tax credit, but beyond that, the test has no impact. It does not matter how you get the 18 points as long as you get them, but there is one exception (which we will discuss more below).

How do I get the certificate?

You apply for the Cultural Test online via the British Film Institute (BFI) portal; if the BFI is satisfied with your application, it will make a recommendation to the Department for Culture, Media and Sport (DCMS) to issue your certificate.

At present, the turnaround time is 18-20 weeks. Therefore, it is key to get applications in as soon as possible, as you cannot apply for the tax credit without a certificate; (indeed, an interim certificate is often a requirement from financiers for financial close as well).

There are two types of certificates available: interim and final. If you are mid-production and wish to make a tax credit claim, you must have an interim certificate, which can be applied for at any time. If there is any doubt or concern about qualification, be sure to apply for an interim certificate – which will provide comfort as to qualification – as soon as possible.

Interim certificates are issued on the basis of the plan for your film or HETV show. You will need to include a budget, shooting schedule and script and demonstrate how you intend to pass the test on the form.

Final certificates can be issued only once the production is completed. This is because the BFI will need to watch the finished project to assess whether the points claimed in Sections A and B are clear on screen. For points claimed in Sections C and D, you will need an accountant’s report (see below).

What points are available?

There are 35 points available to a film under the Cultural Test. This framework applies to films, but the HETV test is fundamentally the same. The Cultural Tests for children’s TV and animation are slightly different.

As mentioned in above, there is one combination of points that is not allowable. Under what is commonly called the "Golden Points Rule," your production cannot qualify if you score points only in Sections A4, C1, C2 and D1-8. Otherwise, any combination is acceptable, which allows for a significant amount of flexibility.

Key things to bear in mind are:

• Section A is about what the viewer believes on screen – therefore, filming what appears to be a British village on a US studio set in would qualify as the film or HETV show would appear to be set in the UK.
• Similarly, an actor’s nationality does not matter for Section A2 – it is all about the nationality or residency of the character and where it is established that they are from or reside.
• The BFI is the ultimate arbiter of the availability of points in Section B, and you will need to provide clear descriptions and support for how your production demonstrates the points that are being claimed. For clarity, “diversity” can apply to subject matter which explores contemporary and social issues of disability, ethnic diversity, or social exclusion, as well as diversity in screen characters or on-screen or behind-the-camera talent with respect to gender, ethnicity or national origins, religion or spiritual belief, age, sexuality, disability, or social and economic background.
• Other than Section C, all other areas allow for UK and/or EEA locations, nationality, or residency. Therefore, a character with a clear European nationality (such as Wonder Woman being Greek) would qualify within Section A2.
• You will need to have evidence to support all points claimed in Sections C and D, so it’s important to retain passports and other supporting documents if needed. Digital onboarding technology – such as EP’s Production Portal, which creates a secure record of each engagement even after you wrap – can help in this respect.

To see a detailed explanation of the points system, broken down by section, take a look at our Cultural Test chart.

What is the accountants report that is required?

Accountants’ reports are required for final certificates where points are claimed in Sections C and D. These can normally be prepared by your external accountant or auditor.

Effectively, this is a third party reviewing (not auditing) the points that are being claimed and signing off on the points as being supported. They will likely want to see evidence such as:

• Shooting schedules and set or location hire agreements for Section C1 points;
• Composer contracts and recording studio agreements or orchestral invoices for Section C2 points; and
• Passport copies for Section D points.

From a timing perspective you will need to factor in time for the accountant to prepare your report before submitting your application to the BFI, as well as the 18-20 week turnaround from the BFI and DCMS.

Who can apply for the Cultural Test?

You can apply for the Cultural Test yourself and submit the application with no involvement from external parties, particularly if you are only qualifying in Sections A and B.

However, it is advisable to (at a minimum) have your adviser review your application as they will likely know some of the nuances of the system and how to interpret the rules in a way to qualify in the most straightforward way.

For this reason, it is often easiest to ask your adviser to prepare the application for you, and it is always advisable to check in at the earliest possible stage on how a production could qualify to avoid nasty surprises down the line.

What happens if things change between receiving interim and final certificates? And what should I watch out for?

With the best will in the world, no production ever goes entirely to plan and there is no problem with changing points that you have applied for between interim and final certification. For example, if you have changed actors and now have a British/EEA actor but a US composer, you can swap those points.

However, if the result of the changes mean that you can no longer get 18 points, you will fail the Cultural Test. If you made an interim claim under your interim certificate, you would then need to repay that tax credit. This is an unusual scenario, but it could happen.

Some changes to watch out for are establishing scenes for characters that get left on the cutting room floor, foreign exchange movements hitting proportion of spend, location of VFX services provided and overrunning overseas shoots.

How EP can help you film in the UK

Overall, the UK Cultural Test is flexible and there are many paths that can be taken to pass it. Productions that might not initially look like they qualify can often find a way with some careful consideration or some tweaks to the script or budget.

If you decide to explore the UK as a filming destination, reach out to Lloyd Gunton and the team at FLB Accountants (an Entertainment Partners company). FLB is a UK-based chartered accounting firm with expertise in media and entertainment accounting, tax and tax incentives, finance, and accounting. They also provide film and TV tax credit incentive estimates and formal opinions to lenders, manage tax credit claim submissions, work with producers to advise on and finalise budgets and provide deal close support for both independent and multi-party financed projects.

Want to learn more about the UK tax credit? Check out our recent Master Series: What Productions Need to Know About the UK Tax Relief.