For production companies, the shift to AVEC is not just a technical change to how relief is claimed. It affects project planning, cashflow, budgeting and the evidence needed to support future claims.
The Audio-Visual Expenditure Credit (AVEC) marks a significant change in how film and TV production companies access creative sector tax support. Available for qualifying expenditure incurred from 1 January 2024, AVEC replaces the previous film, high-end TV, animation and children’s TV reliefs as part of the wider reform of creative industry tax reliefs.
For new productions, AVEC is now the main route for accessing creative sector tax support. From 1 April 2025, new film and TV productions must claim under AVEC, with all productions moving into the regime by 1 April 2027. For production companies, understanding the new rules, rates and claim process is essential to maximising the support available.
What is AVEC?
AVEC is a taxable expenditure credit available to qualifying film, high-end TV, animation and children’s TV productions. The credit is calculated as a percentage of qualifying expenditure and is then subject to corporation tax, meaning the net benefit will depend on the applicable credit rate and corporation tax position.
For film and high-end TV, the taxable credit is available at 34%, equivalent to a net benefit of approximately 25.5% where corporation tax applies at the main rate. For animation and children's TV, the credit is available at 39%, equivalent to a net benefit of approximately 29.25%. The actual cash benefit may vary depending on the company’s corporation tax position and how the claim interacts with its wider tax profile.
Certain qualifying low-budget British films may be eligible for an enhanced AVEC rate of 53% under the Independent Film Tax Credit (IFTC) rules. Broadly, this applies to films that begin principal photography on or after 1 April 2024, meet the relevant creative connection and certification requirements and have core costs below £23.5 million. This enhanced rate can provide significantly greater support than the standard film AVEC rate.
Who can claim?
The relevant production company must make the claim. For films, this will be the Film Production Company. For high-end TV, animation and children’s TV, this will be the Television Production Company. The company must be responsible for pre-production, principal photography or recording, post-production and delivery of the completed production.
The company must also be actively engaged in planning and decision-making and directly negotiate, contract and pay for rights, goods and services. Only one production company can claim for each production, although UK co-producers may be able to access AVEC where a co-production qualifies as British.
What productions qualify?
To qualify, productions must be certified as British by the BFI Certification Unit and must meet the relevant conditions for the type of production. Films must be intended for theatrical release, while TV programmes must be intended for broadcast, including streaming online. High-end TV productions must generally be drama, comedy or documentary programmes, meet the minimum slot length requirement and satisfy the average core expenditure threshold. Production companies should assess eligibility early, as the availability of AVEC can have a significant impact on project budgeting, cashflow forecasts and financing arrangements.
Animation productions must meet the broadcast and British certification requirements and, to be treated as animation, at least 51% of core costs must be spent on animation. Across the AVEC regime, at least 10% of core costs must relate to activities in the UK.
What costs can be included?
Qualifying costs are generally those incurred in the pre-production, principal photography or recording and post-production phases. This can include securing rights, booking studio facilities, acquiring props, set construction, costume-making, rehearsals, engaging cast and crew, filming, recording and visual or sound effects.
Additional support is available for qualifying UK visual effects (VFX) expenditure incurred from 1 January 2025. For eligible film and high-end TV productions claiming the standard 34% AVEC rate, qualifying UK VFX costs can benefit from an enhanced 39% AVEC rate, with the usual 80% cap removed for those costs. This additional VFX credit is not available for films claiming the enhanced AVEC rate under the IFTC rules.
Costs such as marketing, capital costs, financing, bond costs and entertaining are specifically excluded. Each production must be treated as a separate trade, with the profit or loss calculated before the AVEC claim is applied.
What should production companies do next?
The move to AVEC does not fundamentally change the types of costs that qualify, but it does change the way support is calculated, evidenced and paid. Production companies should review project timelines, certification status, UK expenditure, contract arrangements and claim methodology early in the production lifecycle. Taking a proactive approach can help maximise available support, reduce claim preparation issues and minimise the risk of adjustments during HMRC review.
Companies claiming AVEC must also submit HMRC’s Additional Information Form as part of the claim process and retain sufficient evidence to support qualifying expenditure. As HMRC scrutiny of creative sector claims continues, ensuring claims are well-evidenced, technically robust and aligned with the new regime will be increasingly important.
We’re here to help
Our creative sector tax specialists help production companies understand how AVEC applies, assess qualifying expenditure and prepare claims that are ready for HMRC review.
Whether you are planning a new production, transitioning an existing project into AVEC or reviewing your wider approach to creative sector tax reliefs, please get in touch with our specialist team or your usual Azets adviser.