Tax Relief

The UK is currently in a transition period.  The old Creative Industries Tax Relief is available until 31 March 2027 and the new system of Audio Visual Expenditure Credits (AVEC) starts from 1 January 2024.  During this transition period, companies have the option to use the scheme of their choice.

Creative Industries Tax Relief – old scheme

The UK currently has 8 creative industries tax relief schemes:

  • Film Tax Relief
  • Animation Tax Relief
  • High-end Television Tax Relief
  • Video Games Tax Relief
  • Children’s Television Tax Relief
  • Theatre Tax Relief
  • Orchestra Tax Relief
  • Museums and Galleries Exhibition Tax Relief

The tax relief is claimed through the Corporation Tax returns, and enable tax relief at a rate of 25% to be claimed on, for example, feature films intended for theatrical release, or High End TV productions where the cost is in excess of one million pounds per broadcast hour.  The total amount of the relief is subject to a cap of 80% of total core expenditure, therefore giving an effective rate of relief of 20% (25% of 80%) of total core expenditure.

All qualifying productions are subject to a cultural test and BFI has to issue a preliminary certificate and a final certificate under the scheme if a production company wants to make an interim and a final claim. A tax credit repayment is made by HMRC after accounts and a tax return have been submitted. Not all expenditure qualifies as core expenditure and expenditure such that relates to finance, marketing or speculative development does not qualify.

The regulations concerning UK tax relief is complicated and anyone involved in this area is advised to seek expert advice from a qualified accountant with substantial Film Industry expertise.

Attached is a link to the HMRC website

HMRC Creative Industries Tax Relief

Audio Visual Expenditure Credits (AVEC) – new scheme

AVEC amalgamates four of the Creative Industries Tax Reliefs, Film, HETV, Children’s and Animation into one.

The final details of the new scheme are still being fleshed out. We have attempted to outline some key points for how this scheme seems likely to operate but it is extremely important that you consult up to date legislation and government websites before you rely on this information.

Areas that remain the same across both systems include:

  • “Used & Consumed” rules
  • 80% cap
  • HETV £1m slot hour cost
  • Min 10% UK spend
  • Contingent Compensation
  • UK Cultural Test
  • Intention test
  • FPC / TVPC required

AVEC will be part of the company’s taxable profit

The current main rate for corporation tax is 25%
The effective rates are therefore:
Film & HETV – 34% less 25% tax = 25.5%
Children’s and Animation – 39% less 25% tax = 29.25%

It is important to realise that tax credits realised under the new AVEC scheme are themselves taxable and companies must therefore recognise that corporation tax will be incurred on this income.

Areas that are changing include:

  • Rates
  • Connected Parties Rules – eg no profit on recharges / prod fee
    • Only the underlying cost is now qualifying
    • Any profit element can be charged to budget but not allowable for AVEC
  • Definition for documentaries
  • TV min slot length of 20 mins
  • Film / TV must be clear from the outset
  • Notional Tax used in various ways