The UK government has prepared a revised version of the audio-visual tax reliefs, which will be known as AVEC and will be implemented from 1 January 2024. This update, following the RDEC basis, aims to bring structure and clarity to... Read more
The UK government has prepared a revised version of the audio-visual tax reliefs, which will be known as AVEC and will be implemented from 1 January 2024. This update, following the RDEC basis, aims to bring structure and clarity to the industry in light of the OECD pillar 2 rules implemented in the UK. The goal is to stimulate growth and enhance understanding of eligible productions.
The criteria for the tax credit mostly remain unchanged and include the following:
- At least 10% of core costs must be incurred in the UK.
- Qualifying expenditure is capped at 80%.
- An incorporated company in the UK is required.
- The UK company is responsible for engaging all goods and services related to production.
- All tax credit claims must now be submitted online.
- There are no changes to co-production reliefs.
Similar to the RDEC basis, the AVEC model requires costs to be recognized above the line, in Other Income. Instead of additional deductions, the reliefs are considered as expenditure credits. While the tax rebate percentage has increased to 34%, this does not mean that productions will receive an additional 9%. Of the qualifying expenditure, 34% will now be recognized in your profit and loss statement. This amount will be notionally taxed at 25%, resulting in a total tax rebate of 25.5% (an increase from the previous 25%).
It should be noted that the impact of a change in the notional tax rate on the 34% has not yet been confirmed.
The new legislation will take effect from 1 January 2024, but the government has announced a transition process until 1 April 2027.
- For ongoing principal photography as of 1 April 2025, companies can choose between the two tax relief options.
- For principal photography that has not yet commenced as of 1 April 2025, the AVEC basis must be used. The government has not yet provided guidance on how the two regimes will be considered for productions that span the April 2025 cut-off.
Other updates from the report include maintaining the £1 million expenditure threshold per hour for high-end TV, with the minimum slot length reduced to 20 minutes, also effective from 1 January 2024.
Overall, the tax relief remains largely the same, with a real terms increase in the tax break and greater flexibility across the industry.