CREC092100 - Commencement and transition: opting in
Opting in
To claim AVEC or VGEC, companies must opt in. This is done on an individual production basis; a company which has multiple productions can claim the former tax reliefs on some productions and AVEC and VGEC on others.
Companies may only opt in to AVEC or VGEC for accounting periods ending on or after 1 January 2024.
Where a company opts in for an accounting period which straddles 1 January 2024, only expenditure incurred from 1 January 2024 is eligible for AVEC or VGEC. Expenditure incurred before 1 January 2024 is eligible for the relevant former tax relief. To reflect this, the company must apply the apportionment rules set out below.
Relevant closure dates
AVEC and VGEC become mandatory for new productions from 1 April 2025, and for all productions from 1 April 2027. Therefore, the relevant closure dates for productions are:
Production type |
Relevant closure date |
Films and television programmes which have not started principal photography by 1 April 2025
Video games which have not entered the production phase by 1 April 2025 |
31 March 2025 |
Any other production |
31 March 2027
|
Where a production moves in to AVEC or VGEC for an accounting period that straddles a relevant closure date, the production company has two options. It may choose to claim under AVEC or VGEC for the whole period, or split the period in two and receive the relevant former tax relief on expenditure incurred up to the relevant closure date and AVEC or VGEC on expenditure incurred after the relevant closure date.
If the company chooses to split the accounting period, it must apply the apportionment rules set out below.
Apportionment
If the company’s accounting period straddles either 1 January 2024 or a relevant closure date and it opts a production into one of the new regimes, then the production may be due both a tax relief and an expenditure credit in the same period.
In these instances, the accounting period is split into two notional periods. Expenditure must be split between the two on a fair and reasonable basis. One-off items of expenditure must be attributed to the notional period in which they are incurred.
For expenses incurred across the accounting period – wages, for example – a fair and reasonable method of apportionment should be applied. As the split is made partway through the accounting period, a time-based apportionment method will usually be the fairest approach.
Example
A film production company pays a line producer on its film a fee of £80,000 for the accounting period 1 October 2023 to 30 September 2024. The company decides to opt in to AVEC for this accounting period, which straddles 1 January 2024.
Film Tax Relief is due on expenditure incurred for 3 months of the 12-month AP: October to December. AVEC is due on expenditure incurred for 9 months of the 12-month AP: January to September. Therefore, a fair and reasonable method of apportionment for the line producer’s fee would be:
£80,000 x 3/12 = £20,000 expenditure for Film Tax Relief
£80,000 x 9/12 = £60,000 expenditure for AVEC
Additional information form and CT600
On the additional information form, the production should be treated as if it is two productions. It should be included in both the section for the relevant former relief and the section for AVEC or VGEC. This means that some information will have to be entered or submitted twice on the form, including the cultural certificate from the British Film Institute. The company will also need to attach two separate relief calculations to the form – one showing how the relief due under the relevant former relief has been calculated, and one showing how the amount of AVEC or VGEC has been calculated.
The company does not need to submit two CT600 tax returns, because there is still only one accounting period in practice. It should file the tax return as if it were claiming for two productions – one under the relevant former tax relief and one under AVEC or VGEC.
Productions not opting in
If a company does not opt a production in to AVEC or VGEC in the first accounting period ending after the relevant closure date, the separate trade for that production is treated as having ceased at the relevant closure date, and the production is treated as if it has been abandoned.
This means that no relief is available on expenditure incurred after the relevant closure date. The company cannot opt the production in to AVEC or VGEC in a later period. As the production is treated as abandoned, the company does not need to provide a final cultural certificate.