UK Audio-visual Expenditure Credit (AVEC) Explained: A Complete Guide for Producers

In 2023 the UK government made the most significant changes to the UK incentives landscape in over a decade with the introduction of the Audio-visual Expenditure Credit (AVEC).

AVEC went ‘live’ for productions on January 1, 2024 and as of April 1, 2025 is the only regime available to new productions (productions where principal photography started before this date can access the old regime until the sunset date of March 31, 2027).

What is the difference between the UK’s outgoing ‘tax relief’ and AVEC?

The key difference between the outgoing 'tax relief’ and AVEC is that AVEC is a taxable credit. Therefore, the headline rates are not the receivable rates but subject to a 25% reduction.

What are the different strands of AVEC and how much are they worth?

The AVEC regime covers six strands of production, each of which has its own effective rate and minor differences in terms of qualification.

As shown in the above diagram, there are three rates of credit:

• One for low-budget films (often known as the ‘Independent Film Tax Credit’ (IFTC));
• One for animated films and TV shows and children’s TV shows; and
• The standard rate for non-IFTC films and high-end TV (HETV).

As with the old tax relief regime, the UK has an 80% qualifying spend cap. Therefore, if your UK spend exceeds 80% of the total global qualifying spend, the incentive is capped. The bottom section of the above diagram therefore sets out the maximum effective rate of UK incentive available to a production.

How does a production qualify for AVEC?

Regardless of which strand of AVEC you apply for, to qualify for the UK incentive, productions must:

• Incur at least 10% of total core spend in the UK;
• Pass the UK Cultural Test or be a qualifying official co-production;
• Be intended for:
  • Theatrical release (if a film); or
  • Broadcast (if a TV show); and
• Be produced by a UK production company that is:
  • Registered in the UK; and
  • Responsible for all elements of production, including pre-production, principal photography, post-production and delivery.

Note that the UK production company need not undertake all of the above activities itself and may subcontract elements to other production companies, but it must be ultimately responsible for all such activities.

As mentioned above, each strand of AVEC has specific qualification criteria in addition to the standard requirements.

• Enhanced AVEC (IFTC): To qualify for the enhanced AVEC (IFTC), films must have:
  • A maximum core spend of £23.5m (of which a maximum of £15m is qualifying spend); and
  • A British lead director or scriptwriter or be a qualifying co-production.
• Animated film and TV: To qualify for the animated film or TV effective rate, 51% of production spend must be attributable to animation activities (where there is a mix of animation and live action).
• Children's TV: To qualify for the children’s TV effective rate, the production must be aimed at audiences aged 15 or under.
• HETV: To qualify for the HETV effective rate, productions must:
  • Have a minimum qualifying spend of £1m per hour; and
  • Be a qualifying programme (i.e., drama, documentary or comedy).

What spend qualifies for AVEC?

Qualification of costs for the UK incentive is fundamentally driven by the ‘used or consumed’ principal. This means that as long as the underlying activity or use of an asset took place in the UK, the spend will qualify.

Qualification is therefore not reliant on nationality, country of purchase, country of invoice, currency of payment or any other criteria. Instead, it is reliant on where the underlying activity or use of an asset took place.

Key examples of qualifying and non-qualifying criteria include:

• If an American actor performed 10 of their 15 days in the UK, 66% of their fee would be UK qualifying expenditure, irrespective of their nationality or whether the fee was paid to a US company or account.
• Wigs hired from a French company but used for a shoot which takes place solely in the UK would be a UK-used expense and would therefore be UK qualifying expenditure.
• Conversely, a UK crew member who works overseas on a shoot would not qualify for UK incentive as their labour output would be consumed outside of the UK.

Fundamentally, direct production costs qualify for the UK incentive. However, within a standard production budget, there are certain costs that will not qualify, including:

• Any cost of money, interest or financing costs (including associated legals);
• Errors and Omissions (E&O) insurance;
• Publicity or electronic press kit (EPK) costs;
• Entertainment, gift and gratuity costs;
• Development spend;
• Option fees (although full rights purchase costs do qualify);
• Pact fees;
• Motion Picture Association of America (MPAA) or British Board of Film Classification (BBFC) certification costs; and
• Albert certification or carbon offset costs.

Does all spend get treated in the same way under AVEC?

Yes, all costs are assessed on a used and consumed basis, although the method for determining that can vary between costs by type. Generally speaking, all costs will receive the same rate of credit within a given strand of AVEC (i.e., 25.5%, 29.25% or 39.75%).

Are there any ATL or BTL caps on qualifying spend under AVEC?

There are no ATL caps, BTL caps, ratios or GBP value limits on any of the incentives (other than the Enhanced AVEC's (IFTC’s) £15m qualifying cap), which makes the UK incentive very generous compared to many around the world.

Is VFX spend treated differently under AVEC?

The only exception to the uniform treatment of costs under AVEC is for VFX spend. For standard rate film and standard rate HETV costs (the light blue columns in the diagram above), UK qualifying VFX costs receive an enhanced rate of 29.25% (equivalent to the animation and children’s TV rate) and are not subject to the 80% cap.

See our earlier article for a comprehensive overview of the enhanced incentive for VFX spend.

Get expert support accessing the UK AVEC with Entertainment Partners

If you’d like to know more about how to access the UK AVEC on your production, contact Entertainment Partners today!

With vast experience in global and domestic tax incentives, our expert UK team can help you to maximise your budget and can assist with structuring advice, Cultural Test applications and associated reports, film and TV incentives estimates, formal opinions to lenders, incentive claim submissions and deal close support.