Introduction of Audio-Visual Expenditure Credit (AVEC) and Video Games Expenditure Credit (VGEC)

Audio-Visual Expenditure Credit (AVEC) will replace the existing film, high-end TV, animation, and children's TV tax reliefs. Similarly, the Video Games Expenditure Credit (VGEC) will replace the Video Games Tax Relief.

In November 2022, during the Autumn Budget, the UK government released a consultation document outlining proposed changes to the existing audio-visual tax reliefs. These changes were further solidified by Jeremy Hunt in the 2023 Spring Budget. The outcome of this consultation is set to replace the current tax reliefs with new expenditure credit regimes, impacting several sectors in the entertainment industry.

Those affected by these changes include:

1. Film Tax Relief

2. High End TV Relief

3. Animation Tax Relief

4. Children’s TV Tax Relief

5. Video Games Tax Relief

Under the new guidelines, the Film, TV, and Video Games Reliefs will undergo reform, transitioning into expenditure credits. The newly introduced Audio-Visual Expenditure Credit (AVEC) will replace the existing film, high-end TV, animation, and children’s TV tax reliefs. Similarly, the Video Games Expenditure Credit (VGEC) will replace the Video Games Tax Relief.

Expenditure Credit Rates

The new expenditure credit rates are:

1. Film, High-End TV, and Video Games:

Eligible for a credit rate of 34%. After considering the standard Corporation Tax rate of 25%, this equates to an effective credit rate of 25.5%.

2. Animation and Children’s TV:

Eligible for a higher credit rate of 39%. Taking into account the Corporation Tax rate of 25%, this translates to an effective credit rate of 29.25%.

The implementation of these changes will be gradual. Companies involved in productions under the aforementioned categories can begin claiming under the AVEC for expenses incurred starting from January 1, 2024. However, new productions must exclusively claim under the AVEC from April 1, 2025, and all productions must make use of the AVEC from April 1, 2027.

The newly introduced expenditure credit regime is designed to closely align with the current tax reliefs in terms of eligibility and qualifying expenditure. Additionally, the changes allow companies greater flexibility to surrender withheld amounts to group companies, recognizing the unique needs of production companies.

For companies making use of Film Tax Reliefs, the available tax credit will see only marginal improvement. However, these proposals demonstrate the government’s commitment to supporting the Media Sector over the next few years and acknowledge the significant contribution the industry makes to the UK economy.

Overall, the introduction of the Audio-Visual Expenditure Credit and Video Games Expenditure Credit signifies a positive step in streamlining and enhancing financial incentives for the entertainment sector, ensuring its continued growth and prosperity in the UK.

Related content

• UK FILM TAX RELIEF
• MEDIA
• CHILDREN’S TV AND ANIMATION TAX RELIEFS
• HIGH-END TV TAX RELIEF
• VIDEO GAMES TAX RELIEF
• ARTICLES