The UK Independent Film Tax Credit (IFTC) introduces enhanced support for eligible lower-budget British films. As part of the reform of creative industry tax reliefs, qualifying films may be eligible for enhanced AVEC at a rate of 53% on qualifying expenditure, compared with the standard 34% rate for films.
For independent film-makers, this could represent a significant increase in available tax support and an important boost to production financing and cash flow, but the rules require careful consideration of budget thresholds, production timing, certification and qualifying expenditure.
What is the Independent Film Tax Credit?
IFTC is a higher-rate form of AVEC for eligible independent films. It allows qualifying productions to claim a taxable credit at 53% on qualifying expenditure, offering a more generous level of support than the standard film AVEC rate.
To access the enhanced rate, a film must meet specific conditions, including British certification and budget requirements. Principal photography must have started on or after 1 April 2024, and only expenditure incurred on or after that date can be claimed under IFTC.
Could your film be eligible for the enhanced rate?
Eligibility is not always straightforward, particularly where production budgets are close to the relevant thresholds or projects may qualify under either IFTC or the standard AVEC regime. Certification, audit evidence and expenditure timing should also be considered early in the process.
In practice, eligibility should be considered early in the production process, particularly where budgets sit close to the relevant thresholds or where a project may need to be modelled against the standard AVEC regime.
Which films can qualify?
A qualifying film must be intended for theatrical release, certified as British and have at least 10% of its core expenditure used or consumed in the UK. The claim must be made by the film production company responsible for the film's production activities, and the film must also meet the relevant production budget condition.
Films with a production budget of up to £15 million can generally qualify for the full enhanced rate, subject to meeting the other eligibility conditions. Films with production budgets exceeding £15 million may still qualify up to a maximum budget of £23.5 million, although the enhanced relief is gradually restricted as budgets increase. Productions towards the upper end of the range may therefore receive a lower level of benefit than films below the £15 million threshold.
Certification and independence criteria
Early evidence gathering is particularly important where productions expect to rely on the enhanced rate. Production companies should keep clear records showing how the film meets the relevant budget, UK expenditure, independence and certification conditions.
As with the wider AVEC regime, productions must be certified by the BFI Certification Unit. Independent films must also satisfy the additional eligibility criteria established by the BFI for IFTC purposes. Factors considered include whether the film has a UK writer, a UK director, or qualifies as an official UK co-production.
Production companies should ensure they retain sufficient financial records and supporting evidence to satisfy the BFI certification process and support any future HMRC claim.
What costs can be included?
Qualifying costs are broadly aligned with the standard AVEC rules for films. Costs incurred in pre-production, principal photography and post-production can qualify, including securing rights, booking studio facilities, acquiring props, set construction, costume-making, rehearsals, engaging cast and crew, filming, and visual or sound effects.
Marketing, capital costs, financing, bond costs and entertaining are excluded. Each film must be treated as a separate trade, with the credit calculated by reference to qualifying expenditure.
What should film production companies do next?
For lower-budget British films, IFTC could materially improve the value of available support. However, the benefit will depend on meeting the qualifying conditions, evidencing eligibility and maintaining clear records throughout the production process.
Film production companies should review budgets, production dates, UK expenditure and certification requirements early. Where a film sits close to the budget thresholds, modelling the potential benefit of IFTC against standard AVEC may also be important.
We’re here to help
Our specialists can help film production companies assess whether IFTC applies, model the potential benefit and prepare the supporting information needed for a robust claim.
If you are planning a British film, reviewing production budgets or considering whether IFTC could apply, speak to your usual Azets adviser or contact our specialist creative sector tax team.