Maximising UK Film Tax Relief: The Audio-Visual Expenditure Credit (AVEC)

The UK's long-running Film Tax Relief (FTR) has been replaced. Films and television programmes now claim the Audio-Visual Expenditure Credit (AVEC), which includes an enhanced rate for independent films and an extra credit for visual effects.

From Film Tax Relief to AVEC: the key dates

According to HMRC's Creative Industries Expenditure Credit Manual:

• 1 January 2024: AVEC became available for expenditure incurred from this date, as an option alongside the old reliefs.
• 1 April 2024: films starting principal photography on or after this date can qualify for the enhanced independent film rate.
• 1 January 2025: UK visual effects (VFX) costs incurred from this date can qualify for the additional VFX credit.
• 1 April 2025: AVEC became mandatory for new productions, and claims for the independent film rate and VFX credit could first be made.
• 1 April 2027: Film Tax Relief and the other old creative reliefs end entirely. From then, expenditure can only be relieved under the expenditure credits.

A production already under way in FTR before 1 April 2025 may be able to stay in that relief, but only until the old reliefs close on 1 April 2027. After that date, any further spend can only be claimed under AVEC.

Current AVEC rates

Unlike the old relief, AVEC is an "above the line" credit: it is a taxable receipt, taxed at the main rate of Corporation Tax (currently 25%). The net figures below are a straightforward calculation at that rate.

Production type	Credit rate	Approximate net benefit
Films and TV (including high-end TV)	34%	25.5%
Animated films, animated TV, children's TV	39%	29.25%
Independent films (Independent Film Tax Credit)	53%	39.75%
UK VFX costs on productions at the 34% rate	39%	29.25%

The credit is calculated on qualifying expenditure, which is the lower of 80% of total core costs or the UK core costs (HMRC guidance).

Who qualifies

The company

The claimant must be the production company: the company responsible for pre-production, principal photography, post-production and delivery, which is actively involved in decision-making and directly negotiates, contracts for and pays for rights, goods and services. It must be within the charge to UK Corporation Tax, but need not be incorporated in the UK.

The film

• British certification: the film must be certified as British by the British Film Institute (BFI), either by passing the cultural test or as an official co-production under one of the UK's co-production treaties. Interim and final certificates are issued.
• Theatrical release: the film must be intended for theatrical release.
• UK spend: at least 10% of core costs must relate to activities in the UK. Core costs exclude development and distribution.

The Independent Film Tax Credit (53%)

A film can claim the enhanced rate if it is certified by the BFI as a low-budget independent film. Under HMRC's manual, this requires:

• passing the cultural test;
• a budget condition: total core expenditure, including co-producers' spending and anticipated future costs, of no more than £23.5 million;
• a creative connection condition: the film is an official co-production or has a UK writer or director, meaning a British citizen or someone ordinarily resident in the UK (CREC021130);
• principal photography starting on or after 1 April 2024.

The £23.5 million figure is a certification limit. The credit itself is capped separately: no more than £15 million of expenditure can be included in a 53% claim, which gives a maximum credit of £6.36 million (53% of 80% of £15 million). A film costing between £15 million and £23.5 million can still be certified. According to the Treasury and HMRC policy note, the company can then either keep claiming 53% up to that cap or claim the standard 34% on all its qualifying expenditure instead. Because the cap is fixed, the advantage of the 53% rate shrinks as the budget rises, until at about £23.5 million the two options give roughly the same credit. This is an effect of the cap, not a separate statutory taper. If core costs go over £23.5 million, the film stops being independent and the whole claim moves to 34%, so keep careful control of overspends and contingent payments. The VFX and animation uplifts cannot be added to an independent film claim.

The visual effects credit

From 1 April 2025, films and TV programmes at the standard 34% rate can claim an additional credit so that relevant VFX expenditure is relieved at 39% (CREC061430). Relevant VFX costs are also exempt from the 80% cap. Under HMRC's rules:

• the work must be carried out in the UK, meaning the artist is physically based in the UK, wherever the vendor or cloud server is located;
• VFX means using computer technology, including AI tools, to create or alter images, such as compositing, CGI, rotoscoping, motion capture and virtual set imagery;
• excluded costs include capital items such as hardware, principal photography, LED volume hire during the shoot, indirect overheads and travel, project management, and development-stage pre-visualisation.

Work split between UK and overseas teams must be apportioned on a just and reasonable basis.

How to claim

1. Apply to the BFI for an interim British certificate and, if relevant, low-budget independent film certification.
2. Keep core costs split between UK and non-UK, and by category, from the start of pre-production.
3. Claim in the production company's Company Tax Return. Returns filed on or after 6 April 2026 must include the CT600P Creative Industries supplementary page.
4. Send the additional information form with the BFI certificate (final once completed), statements of UK and non-UK core costs, a cost breakdown and details of connected party transactions.

The credit first settles Corporation Tax and other tax liabilities, can be surrendered to group companies, and any balance is paid out. Claims can be made, amended or withdrawn up to two years after the end of the accounting period.

Practical tips

• Check the cultural test and, for the 53% rate, the UK writer or director condition before contracts are signed.
• Maximise genuine UK spend. Goods and services must be used or consumed in the UK to count as UK expenditure.

Related support

Studios in England can also get 40% business rates relief on qualifying film studio premises from 2024/25 to 2033/34. Local authorities apply it automatically. Separately, the BFI's UK Global Screen Fund, funded by the Department for Culture, Media and Sport, offers grants for international co-production, distribution and business development, with a budget of over £18 million a year for 2026 to 2029. These are grants, separate from the tax credit.

Key points

• Film Tax Relief closed to new productions on 1 April 2025 and ends completely on 1 April 2027.
• AVEC pays 34% (about 25.5% after tax), 39% for animation and children's TV, and 53% for certified independent films.
• The independent rate needs BFI certification, core costs of no more than £23.5 million and a UK writer or director (or official co-production). No more than £15 million of expenditure counts, so the maximum credit is £6.36 million.
• UK VFX costs can get 39% and are exempt from the 80% cap.
• Claims are made on the Company Tax Return with the CT600P page and supporting evidence.