UK AVEC Update: What HMRC's New Guidance Means for Film and TV Productions

HMRC recently updated its UK Audio-visual Expenditure Credit (AVEC) guidance on a few areas that could affect the total value of claims and when expenditure is claimable.

Change 1: Four-Month Rule

Historically, expenditure has been able to be claimed as long as it is paid within four months of the year end, irrespective of when the claim is made (i.e., before or after the four-month cut-off point).

For claims that are submitted more than four months after the year end, there is no change: the timing of the eligibility remains the same.

However, for productions that submit a claim within a four-month period, HMRC’s updated interpretation is that all expenditure must be paid by the time of submission, even if it is set to be paid before the four-month period expires.

In practical terms, the impact is limited to spend that is expected to be paid imminently but has not been paid at the date of the claim. 

It is also important to note that this does not change underlying eligibility, just the timing of when expenditure can be claimed upon.

Change 2: Flights

To date, flight qualification has been linked to the activity being performed when getting off the flight; if the person was working, the flight was treated based on destination (UK or non-UK). If the person was not working (say they are returning home to the US following a UK shoot), it was the location of the work that governed the qualification and the return leg would also be UK qualifying.

However, the new guidance simplifies this. Now, if a flight starts or ends in the UK, the flight is qualifying for incentive purposes.

This does provide some upside as virtually all previously qualifying flights remain qualifying and additional flights should also now qualify.

The only potential now non-qualifying flights are multi-legged trips or stopovers as they will now be assessed by leg rather than by ultimate destination.

Change 3: Additional Form

An extra form has been introduced to the corporation tax return alongside the claims submitted. This is more of a data entry requirement and should not place any additional burden on production.

How Entertainment Partners can help you access the UK AVEC

If you’d like to know more about these changes or 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 (including HMRC enquiry responses, if needed) and deal close support.