Insights Government publishes response to its consultation on audiovisual tax reliefs and announces policy changes


As part of the Spring Budget measures announced on Wednesday by Chancellor Jeremy Hunt, the government published its response to the Treasury’s audio-visual tax reliefs public consultation and confirmed that it will combine the UK’s current audio-visual reliefs into a single Audio-Visual Expenditure Credit (AVEC) of broadly equivalent value. The new AVEC will run alongside the existing film, high-end TV, animation and children’s TV tax reliefs for accounting periods beginning on or after 1 January 2024 before being obligatory for new productions post 1 April 2025 (unless principal photography has not been concluded on this date – see detailed transitional provisions below).

Whilst the fine details of AVEC will become clearer in the coming weeks and months as conversations continue and draft legislation and HMRC guidance is produced, a summary of the headline points is set out below.

Summary of AVEC Key Features:

  • AVEC will be a refundable expenditure credit, based on the existing R&D expenditure credit. This is different from the current calculation of the existing reliefs. AVEC will be calculated directly from qualifying expenditure. The credit will be accounted for as an income receipt and included in a company’s profits and subject to corporation tax (with a deduction allowed from the corporation tax).
  • Film and High-End TV will be eligible for a headline credit rate of 34%, which will broadly equate to a 25.5% credit as a % of qualifying expenditure (as opposed to the current 25% relief – see a calculation example here).
  •  Animations and children’s TV will be eligible for a headline credit rate of 39%, which will broadly equate to a 29.25% credit as a % of qualifying expenditure (as opposed to the current 25% relief – see a calculation example here).
  • Each of the qualifying criteria which apply to the current reliefs will be maintained, including the 80% expenditure cap.

For High-End TV in particular:

  • The minimum expenditure threshold will remain at £1 million per slot hour;
  • The minimum slot length will be reduced to 20 minutes applying on an episode-by-episode basis; and
  •  A definition of documentary will be transposed into legislation and will be based on the BFI’s definition being “a factual or realistic programme based on real events, places or circumstances and intended to record or inform”.

The government has also stated that it will consider the case for targeted support for Visual Effects and will provide an update on this later in the year.

Transitional periods:

  • There is a generous transition period: film and TV productions that have begun but not concluded principal photography on 1 April 2025 may continue to claim relief under the current system until 31 March 2027.
  • From 1 April 2027, all claims must be made under the AVEC system.

Please see copies of HM Treasury’s “Audio-visual tax reliefs consultation: Summary of responses” and an expected timeline of events for reference.

Clearly, there will need to be ongoing engagement with the Treasury on the detailed design and implementation of the AVEC, together with other important details, but overall this seems an excellent result for the sector.