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HMRC internal manual

VAT Fraud

HM Revenue & Customs
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What to consider prior to determining whether to use an intervention: matters to consider when looking at particular types of taxable person or activity: creative industries tax reliefs: the administration of the tax reliefs: the British Film Institute

The role of the BFI

The BFI is responsible for:

  • assessing applications for films, high-end television programmes and animation programmes (and video games once approval is given) to be certified as British either under a cultural test or as an official co-production
  • assesses applications on behalf of the Secretary of State for Culture, Media and Sport (DCMS),
  • issuing the certificates, and
  • issuing a ‘Letter of Comfort’.

The BFI works closely with DCMS and HM Revenue & Customs (HMRC) in the prevention of fraud. When checking an application the BFI will carry out a risk assessment, even where it qualifies for the Cultural Test, to look for any indications that the tax reliefs, VAT and other taxes are being fraudulently accessed, abused or exploited. Where it believes there may be an attempt to defraud the revenue the BFI will contact DCMS and HMRC (see VATF36451). However, the BFI officials dealing with these applications are not VAT specialists, so obviously it cannot be expected that they will identify all instances of fraud.

The Cultural Tests

In order for a product to be certified as British (be it a film, high-end TV programme, animation or video game (once approval is given)) the BFI must be satisfied that it passes the relevant Cultural Test. A product will pass the relevant Cultural Test if it is awarded 16 points out of a possible 31 points, covering aspects such as:

  • content (characters, subject matter and language),
  • cultural contribution (creativity, heritage and diversity),
  • hubs (principal photography / visual and/or special effects, music recording / audio and/or picture post production) and
  • practitioners (director, scriptwriter, producer, composer, lead actors, majority of cast, key staff and majority of crew).

The two stages of certification

Interim certificates

An interim certificate will be issued before a product is completed if the BFI and DCMS are satisfied that the product passes the relevant Cultural Test.

The interim certificate confirms that, based on the information provided by the applicant, that the product is likely to meet the relevant Cultural Test.

Whilst applying for an interim certificate is voluntary, it is required should a claim for relief be made at the end of an accounting period, before the product is completed.

Final certification

A final certificate will only be issued after the product has been completed and can not be requested prior to that point.

A final certificate is essential if a claim for relief is to be made once the product has been completed.

The statutory declaration

By law an applicant must make a statutory declaration as to the truth of the particulars contained within the application. This declaration must be made before a practising solicitor, general notary, justice of the peace or other officer authorised by law.

A person making a false statutory declaration may be prosecuted.

The ‘Letter of Comfort’

An applicant who is not ready to make a full application for whatever reason can submit a draft application and receive a Letter of Comfort that the Cultural Test is likely be met. The Letter of Comfort can not be used when making a claim for a tax relief.