Finance Bill: Further relief and other changes for creative industries

Finance Bill 2024-25 introduces enhanced relief for visual effects (VFX) costs for film and television production companies claiming under the audio-visual expenditure credit (AVEC). Broadly, UK VFX expenditure will attract an enhanced rate of 39 percent (compared to the normal rate of 34 percent) with the 80 percent cap on qualifying costs applicable under AVEC being lifted for UK VFX costs. The enhanced rate and removal of the cap means that the after-tax effective rate of relief on UK VFX costs will increase from 20.4 percent to 29.25 percent.

The additional tax relief for VFX costs will apply to expenditure incurred from 1 January 2025. Companies will be able to claim the new credit from 1 April 2025. However, the additional tax relief will only be available to production companies when the production has been completed and received a final certificate from the British Film Institute (BFI) (except where the production has been abandoned). This means claims for the additional relief can only be made for the completion period of the production (or a subsequent period). For interim periods, the production company will still be able to claim the normal 34 percent rate of AVEC, including on the UK VFX costs.

Unfortunately, the mechanics for how this additional benefit is given for UK VFX expenditure is not straightforward and may lead to a further administrative burden for film and television production companies looking at making AVEC claims. Please speak to your usual KPMG in the UK contact if you would like assistance with this.

The Finance Bill also incorporates some minor administrative changes affecting the AVEC and video games expenditure credits (VGEC). In order for AVEC/VGEC claims to be valid, either an interim or final BFI certificate must accompany the claim as part of the online Additional Information Form submission. For completed productions, a final certificate must accompany the claim submission otherwise the claim will not be valid.

A key point to note is that the certificate needs to be in date when the tax return is submitted – this will be more of an issue for interim certificates than final certificates, therefore claimants with long production lead times will need to monitor their interim certificates and if the certificate expiry date is near, they will need to apply for another interim certificate.