Creative industries tax reliefs boosted

The UK's world-leading creative industries are receiving a boost with the introduction of new Audio-Visual Expenditure Credits (AVEC) and Video Games Expenditure Credits (VGEC).

These new credits are more generous than the previous tax relief schemes they replace and are intended to ensure the UK remains one of the most attractive places in the world to produce high-end content and innovative games.

The move to expenditure credits

The new AVEC and VGEC regimes follow the structure of the R&D Expenditure Credit (RDEC). Instead of an additional deduction from taxable profits, the relief is calculated as a taxable credit based on qualifying expenditure. This makes the value of the relief more visible 'above the line' in a company's accounts, which is often preferred by international investors and production studios.

Increased rates of relief

The headline rates for the new credits are highly competitive. The base rate for film, high-end TV, and video games is 34%. For children's TV and animated TV/film, an enhanced rate of 39% is available. Even after factoring in Corporation Tax on the credit, the net benefit to production companies is slightly higher than under the old system.

Transition period

Companies can opt into the new AVEC and VGEC schemes for accounting periods ending on or after 1 January 2024. However, to provide stability for productions already underway, the legacy schemes will remain available until 31 March 2027. Production companies must carefully model both options to determine the optimal time to transition to the new rules.