Update on the Audio-Visual Expenditure Credit legislation

4 Dec 2023

video game controller

As you will know, last year the government confirmed its commitment to the UK’s audio-visual tax reliefs and, after consultation, announced a number of changes to the current rules, releasing draft legislation in July 2023.

The definitive detail of those changes was announced as part of the Autumn Statement, where the government published revised legislation on the proposed reform of the film, television and video games tax reliefs to expenditure credits.

With specific regard to film and television, the key points covered by the legislation are summarised below.


  • The previous concerns with regard to connected party transactions have been allayed with the new draft of the legislation allowing connected parties to transact on an arm’s length basis and that the arm’s length transaction could be eligible expenditure.
  • The revised legislation sets out a new definition of a documentary TV programme, determining that a television programme is a documentary if:
    a. It depicts real events, places or circumstances
    b. It is not a drama, and
    c. It is primarily intended to record or inform.
  • The ability to switch between the Film and High-End TV route has been re-introduced.
  • Announcement of a ‘call for evidence’ from the visual effects industry, with the government seeking to provide more generous relief for visual effects work.  More details are contained here.

Retained elements

Many of the familiar features of the existing Creative Sector Tax Relief system have been retained, including:

  • UK expenditure defined as expenditure on goods/services “used or consumed” in the UK.
  • The mechanism for apportioning expenditure between UK and non-UK remains a “just and reasonable” basis.
  • The TV minimum expenditure test remains at £1 million of core expenditure per hour of slot length.
  • The 80% cap is retained – UK core expenditure in excess of 80% of total core expenditure will not generate credit.
  • The minimum UK core expenditure threshold remains 10% of total core expenditure.
  • The need for all costs claimed upon to have been settled within 4 months of the period end continues.

Expenditure Credit

The Expenditure Credit will be received net of a tax deduction at the main rate of corporation tax (currently 25%), so the gross and net value of the relief will be:

  • For shows other than animated films, programmes or children’s TV programmes: 34% gross – giving a credit after deduction of tax (at 25%) of 25.5%.
  • For animated films, or programmes and children’s TV programmes: 39% gross – giving a credit after deduction of tax (at 25%) of 29.25%.

Additional updates

The main corporation tax rate sum deducted from the gross credit can be utilised in various ways, including being surrendered to other group companies and used to discharge part of their own corporation tax liabilities.

The expenditure credit will be available to be claimed provided that the company is not in liquidation or administration.

“Films” and “television programmes” continue to be separately defined, with films needing to have an intention for theatrical release in order to qualify, and television programmes needing to have an intention for broadcast. The ability to change track from film to HETV has been re-introduced.

For TV programmes (other than animations or children’s programmes) each episode must have a slot length greater than 20 minutes in order to qualify (previously 30 minutes). It will not be possible to aggregate multiple shorter episodes to achieve this 20-minute threshold – for example a series consisting of three 10-minute episodes will not qualify.

Transitional rules

The government has also sent out the following transition rules for film and television:

  • The audio-visual expenditure credit (AVEC) rules will be available to companies with accounting periods ending on or after 1 January 2024.
  • If a company’s accounting period begins before 1 January 2024 but ends after 1 January 2024, it will have the option to apply existing rules on expenditure incurred up to 31 December 2023 and apply AVEC rules on expenditure incurred from 1 January 2024.
  • For productions where principal photography begins before 1 April 2025, existing rules remain available up to 31 March 2027.
  • Existing rules will not be available to productions where principal photography commences on or after 1 April 2025.


The implementation timeline, and related eligibility to claim under the old or new regime is outlined as follows.

Next steps

As with any procedural change, production companies will need to carefully consider the practical implications over the transition period. These considerations may include the following:-

  • Impact of the additional uplift on financing needs.
  • Maintain thorough records which demonstrate and underpin your arm’s length related party transactions.
  • Deciding whether to transition to the AVEC from 1 January 2024 and the related accounting and/or tax periods required to do so.
  • Administrative impact of identifying and apportioning those costs straddling the above periods.
  • Re-evaluating your contractual arrangements with your legal counsel, to ensure agreements are sufficiently worded to comply with AVEC requirements rather than/ in addition to the existing tax credit regime.
  • Interaction with Pillar 2 legislation for larger groups, if applicable.
  • Arrangements required for notional tax utilisation by other group companies.
  • Cashflow impact resulting from any delay in your first AVEC claim as the legislation awaits Royal Assent in parliament.
  • Presentational impact on the financial statements and related group accounting policies.
  • If applicable, whether a documentary continues to meet the revised definition.

If you would like to discuss any of the issues raised above, do please get in touch with your usual Saffery partner at the earliest opportunity.

Contact Us

Nigel Burke
Partner, London

Key experience

Nigel is a partner in the firm’s London office, providing specialist financial, accounting, audit and taxation advice in the media...