Additional tax relief for visual effects (VFX)
Published 30 October 2024
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Who is likely to be affected
Companies that are incurring UK visual effects (VFX) costs on films or high-end television productions that qualify for the Audio-Visual Expenditure Credit (AVEC).
General description of the measure
From 1 April 2025, companies will be able to claim an enhanced 39% rate of AVEC on their UK VFX costs (increased from 34%). The AVEC’s 80% cap on qualifying costs will be removed for UK VFX costs. Qualifying VFX costs incurred from 1 January 2025 will be eligible.
To ensure proper targeting and safeguard the policy from abuse, the additional tax relief will only be available to companies when the production has received a final certificate from the British Film Institute (except where the project is abandoned). This means claims can only be made for the completion period (or a subsequent period). The completion period is the accounting period when the production is completed.
For interim periods, the company will still be able to claim the normal 34% rate of AVEC, including on the VFX costs.
Claims will have to be accompanied by evidence of qualifying expenditure. More details of this will be set out in regulations before 1 April 2025.
Policy objective
The enhanced 39% rate of AVEC and removal of the 80% cap on qualifying costs for UK VFX costs will incentivise inward investment and improve the competitiveness of the UK’s film and VFX industry.
To safeguard the additional tax relief from abuse, companies claiming the additional tax relief for VFX costs will be required to provide additional evidence to verify VFX costs.
Background to the measure
In March 2024 it was announced that from 1 April 2025, film and high-end television programmes will be able to claim an enhanced Audio-Visual Expenditure Credit (AVEC) rate of 39% on their UK VFX costs. It was also announced that AVEC’s 80% cap on qualifying costs will be lifted for UK visual effects costs.
A consultation of the design of the additional tax relief ran from 27 March 2024 to 22 May 2024. A summary of responses was published at Autumn Budget 2024.
Detailed proposal
Operative date
The measure will apply to expenditure incurred from 1 January 2025. Companies will be able to claim the new credit from 1 April 2025.
Current law
The current law is contained in Part 14A of the Corporation Tax Act 2009 (CTA 2009).
Paragraphs 83S to 83W of Schedule 18 to the Finance Act 1998 set out the administrative provisions for all the creative reliefs.
Proposed revisions
The measure will insert new section 1179EC into Part 14A CTA 2009. This will allow companies to claim an additional amount of credit in relation to VFX expenditure in qualifying films and high-end television programmes (which can currently claim AVEC at 34%).
This VFX credit will only be available in the completion and post-completion periods. The credit is calculated at 39% of UK VFX expenditure, and will not be subject to the 80% cap on qualifying expenditure.
These amendments will apply to expenditure incurred on or after 1 January 2025.
A claim for VFX credit may not be made before 1 April 2025.
The supporting evidence required as part of a claim will be set out in regulations by 1 April 2025.
Summary of impacts
Exchequer impact (£ million)
| 2024 to 2025 | 2025 to 2026 | 2026 to 2027 | 2027 to 2028 | 2028 to 2029 | 2029 to 2030 |
|---|---|---|---|---|---|
| — | - 10 | - 65 | - 70 | - 75 | - 75 |
These figures are set out in table 5.2 of Autumn Budget 2024 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Spring Budget 2024.
Economic impact
This measure is not expected to have any significant macroeconomic impacts.
Impact on individuals, households and families
This measure has no impact on individuals, as it is only available to businesses.
Equalities impacts
It is not anticipated that there will be impacts for those in groups sharing protected characteristics.
Impact on business including civil society organisations
This measure is expected to have a negligible impact on the approximately 1,000 companies that claim AVEC on film and high-end television production. Full details of the evidence requirements will be set out in regulations before 1 April 2025.
One-off costs are expected to be negligible and will include familiarisation with the change. For businesses that choose to claim the enhanced credit, continuing costs will include providing HMRC with more information, to evidence the qualifying VFX expenditure. Companies will need to identify expenditure that qualifies for VFX relief and separate this out from other expenditure, and factor this into their tax computation. This information is only expected to be provided once per production, in most cases.
Customer experience is expected to be slightly impacted due to a need to provide the additional information required to successfully submit a claim for the new credit.
The measure is not expected to impact on civil society organisations.
Operational impact (£ million) (HMRC or other)
HMRC operational costs for these changes are estimated to be £4.1 million, to cover both compliance staff and IT changes.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
The measures will be monitored through information collected in tax returns.
Further advice
If you have any questions about this change, contact the Creative Industries reliefs policy team by email: creativespolicy@hmrc.gov.uk.