Following a consultation and the publication of draft legislation in July 2023, the Autumn Statement confirmed that film, TV and video games tax reliefs will be reformed into refundable expenditure credits.


The audio visual expenditure credit (AVEC) will cover the film and TV tax reliefs. The video games expenditure credit (VGEC) will cover the existing video games tax relief. The mechanics of the new reliefs will be modelled on the research and development expenditure credit (RDEC).  

These reformed incentives will enable a company to claim a taxable credit based on its eligible expenditure on qualifying production activities. The rate of relief is 34% for video games, film and high-end TV. This figure mirrors the generosity of existing measures (after deducting corporation tax due on any credit received). However, animation and children’s TV will have a rate of 39%, reflecting the government’s intention to provide additional support to these industries.  

When do the rules come into effect?

Films and TV programmes that have not concluded principal photography, and video games that have not concluded development by 1 April 2025, may continue to claim relief under the current regime until 31 March 2027. However, taxpayers will have the opportunity to opt into the new regimes from 1 January 2024. From 1 April 2025, new games and productions must claim the new AVEC or VGEC.  

What is staying the same? 

The key features of the reliefs that remain unchanged include the following: 

  • AVEC and VGEC will be subject to an 80% cap on qualifying expenditure;
  • UK expenditure is defined as expenditure on goods or services ‘used or consumed’ in the UK (see below re VGEC);
  • the minimum UK core expenditure remains at 10% of the total to be eligible for the new reliefs;
  • apportionment between UK and non-UK expenditure should be on a ‘just and reasonable’ basis;
  • the TV minimum expenditure test is still £1m of core expenditure per hour of slot length;
  • all costs claimed should be settled within four months of the period-end; and
  • expenditure between connected parties can be eligible expenditure but must be at ‘arm’s length’. 

What is changing? 

While much of the ‘old’ regimes has been retained there are some key differences including: 

  • qualifying expenditure for VGEC will now only include expenditure ‘used or consumed’ in the UK rather than expenditure incurred in the EEA;
  • the nature of obtaining relief – now a taxable expenditure credit;
  • reduction in minimum slot length for high-end TV from 30 to 20 minutes to be eligible for AVEC;
  • extra anti-abuse measures between connected parties; and
  • the definition of a documentary is to be updated and will be based on the British Film Institute’s definition.  

Final thoughts 

For taxpayers affected by pillar two, the reforms will be welcomed. The new rules will align with the introduction of pillar two in the UK from 1 January 2024. 

The transitional provisions will also be very helpful, particularly for the video games sector where developers can continue to claim relief for EEA expenditure until March 2027.  

Administration of the new rules could be challenging, particularly for transitional periods. Businesses will also need to consider the presentation of AVEC or VGEC reliefs in the accounts, as this will be a significant change from the old regimes. 

Alongside increased relief for animation and children’s TV, the government launched a call for evidence on the visual effects industry to inform targeted proposals on increasing the generosity of the AVEC for visual expenditure. ICAEW is pleased to see the government supporting a growing industry and looks forward to working with members and the government to develop policy in this area. 

The new reliefs are provided for by cls3-7 and Schs 2-6 of Finance Bill 2023-24

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