On 1 January 2024, the UK government launched its new tax credit system for the screen sector, known as the Audio-Visual Expenditure Credit (AVEC) and the Video Games Expenditure Credit (VGEC).
Both credits will eventually replace the existing tax relief options available for films, high-end TV, children's TV, animations and video game production. However, production companies will have the option to use either the new or the existing regime until at least April 2025, with the existing regime coming to an end formally on 1 April 2027.
Under the new system, the government has increased the amount that can be claimed under each credit, but the new credits are also subject to corporation tax (currently 25%). This means that the net effect of the increased new credits is more modest: film, high-end TV and video games credits have increased from a possible 25% to 25.5%. Animated films, or programmes and children’s TV programmes will increase from a possible 25% to 29.25%.
The intention is for the UK to remain an attractive location for top-tier audiovisual content, and also to promote it as a location for animations in particular, where the UK often loses out to countries with more generous tax credits.
The majority of the features of the existing tax relief regime have been retained for the AVEC and VGEC. Key differences include the deductible corporation tax element, which can be surrendered to other group companies or used to discharge other corporation tax liabilities, and a new definition of TV documentaries, which appears to prevent so-called “structured reality” shows from being eligible for the AVEC.