UK Reforms Film, TV Tax Relief, Introduces Expenditure Credits

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The UK government is to overhaul audio-visual tax reliefs and introduce expenditure credits for film, high-end TV and video games.

The new expenditure credits are modelled on the government’s existing Research and Development Expenditure Credit (RDEC).

3. UK Reforms Film, TV Tax Relief, Introduces Expenditure Credits

The government has introduced expenditure credits

The reform to expenditure credits will change the way that relief is calculated. The expenditure credits will be calculated directly from qualifying expenditure instead of being an adjustment to the company’s taxable profit as under the existing regime.

The government will implement two models: one for the film and TV sectors, which will be merged into a single scheme called the Audio-Visual Expenditure Credit (AVEC); and one for video games, the Video Games Expenditure Credit (VGEC).

Both models will have an 80% cap on qualifying expenditure.

Under the AVEC, films and high-end TV programmes will have a headline rate of 34%, while animations and children’s TV programmes will have a rate of 39%. Video games will have a headline rate of 34% under the VGEC.

The headline higher rates for film, TV and video games will equate to around 25.5% in actual relief – a small increase on the 25% relief currently available.

Meanwhile, the £1 million per hour expenditure credit threshold for high end TV will remain unchanged.

The changes have been welcomed by the UK audio-visual industry. Ben Roberts, chief executive of the BFI said: “We welcome the Chancellor’s news today of the reformed Expenditure Credits across our screen industries, a testament to how crucial they are to the UK’s economy and growth. Combined with our extraordinary talent, infrastructure and technical and creative expertise the screen sector Tax Reliefs, now remodelled as Expenditure Credits, have super charged our industry on an unprecedented scale. The news today will ensure the UK remains a truly globally competitive production hub, giving us economic recovery and growth, creating thousands of jobs for people up and down the country and enabling creative talent and storytelling to thrive.”

Roberts added: “It’s good news that the high-end TV threshold has been preserved. I am particularly heartened to see a much-needed boost for children’s television and animation as two areas of cultural and societal importance in which the UK excels creatively, but that still have significant growth potential. I look forward to reading the further detail in the draft legislation that will be published this summer.”

In a statement, producers alliance Pact said: “Pact welcomes the outcome of the Government’s consultation on audio-visual tax reliefs announced in today’s budget. In December 2022 Pact submitted a substantial report on children’s and animation TV tax credits to Government recommending an increase to the current tax relief. Therefore, Pact is pleased to see the level raised from 25% to 39% which should help stimulate investment in children’s and animation content and build on the success of the existing tax credit. We are particularly pleased that Government has listened to our concerns about the future of UK children’s TV production and has acted to support this critical part of the UK TV sector.

“Pact is also pleased that the Government has listened to concerns raised by both Pact and UK broadcasters about raising the minimum expenditure threshold for HETV tax relief.”