Film Industry Reliefs

Company Eligibility

In order to qualify for relief a company must be considered the Production Company for the production. To be considered the Production Company, a company must fulfil the following criteria:

• Be actively engaged in planning and decision-making.
• Directly negotiate, contract, and pay for rights, goods, and services.
• Be responsible for pre-production, principal photography, post-production, and delivery of the Film/TV programme

There can be only one Production Company for a given production.

Eligible Films and TV Programmes

In order to qualify for relief, a film must:

• Be intended for theatrical release,
• Certified as British
• Meet the UK minimum expenditure requirement, at least 10% of core expenditure must be UK expenditure.

In order to qualify for relief, a TV programme must:

• Meet the definition of a drama, documentary, animation, or children’s programme, and not be an excluded programme, Excluded programmes include advertisements, news, current affairs, entertainment shows, and live event broadcast.
• Be intended for broadcast.
• Meet the UK minimum expenditure requirement, at least 10% of core expenditure must be UK expenditure.
• The average core costs for a TV Programme must be at least £1 million per hour of slot length, which must be greater than 30 minutes.

Qualifying as ‘British’:

To be considered “British”, a film must be certified as such by the British Film Institute, which issues interim and final certificates based on the production stage of the Film or TV Programme being considered.

The BFI cultural test has a pass mark of 18 points out of 35, covering cultural content, contribution, hubs, and practitioners.

Qualifying Expenditure:

Companies are eligible for the AVEC on core costs. Core costs include expenditure on pre-production, principal photography, and post-production.

The eligible costs are capped at the lower of either 80% of total core costs or the amount of UK core costs. UK core costs are core costs which are used or consumed in the UK. Costs will typically be used or consumed where they are incurred but some exceptions such as script writing do exist.

Rates of Relief:

The headline rate of relief is 34%, which is taxable in the hands of the recipient. The effective rate of credit after accounting for the 80% cost cap and deducting Corporation Tax at 25% is therefore 20.4%.

Certain kinds of production and costs may obtain higher relief rates provided that some additional criteria are met. These higher relief rates are mutually exclusive and which is most suitable for a particular film will depend on individual circumstances.

Independent Film Tax Credit (IFTC):

The Independent Film Tax Credit (IFTC) offers smaller film productions the opportunity to claim an enhanced AVEC rate of 53% on qualifying core expenditure. This translates to an effective credit rate of 31.8% after applying the 80% cost cap and deduction of Corporation Tax.

To qualify for IFTC, a film must meet the following criteria:

• The film must have started principal photography on or after 1 April 2024
• The film must be produced by a UK production company.
• The film must have a production budget (excluding marketing and distribution) of up to £23.5 million. Relief is capped at 80% of £15 million.

The film must also meet at least one of the following conditions:

• Have a UK writer.
• Have a UK director.
• Be certified as an official UK co-production.

In addition, the film must meet all of the qualifying criteria for the standard AVEC.

Animation and Children’s TV

Children’s TV programmes and Animated TV programmes are entitled to a higher credit rate of 39% on qualifying core expenditure. This translates to an effective credit rate of 23.4% following application of the 80% cost cap and deduction of Corporation Tax.

To be considered a Children’s TV programme, when the production activities begin, it must be reasonable to expect that the primary audience of the programme is people under the age of 15.To be considered an Animated TV programme at least 51% of the total core expenditure on the show must be spent on animation costs.

Visual Effects (VFX)

From 1 January 2025, there is an enhanced rate of credit available for visual effects (VFX) costs under the AVEC. The VFX credit is only  available to the relevant Production Company for films and television programmes in the completion and post-completion periods i.e. those films which have received a final certificate from the BFI.

For qualifying films, the 80% cap on qualifying costs is removed for UK VFX costs and the AVEC rate for VFX costs is increased to 39%. This translates to a post tax credit rate of 29.25%.

Non-VFX costs remain eligible for relief at the standard effective rate of 20.4%.

Claim Process and Administration:

In order to claim the AVEC, claims must be included on the company’s tax return.

An Additional Information Form (AIF) must also be submitted to HMRC before the corporation tax return is submitted.

The AIF includes the production name, start date of pre-production, detailed expenditure breakdowns, details of connected party transactions, and a copy of the British Film Institute certificate.