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Shooting in the UK

Leading figures in the UK TV and film industry have given a broadly positive initial response to the government’s plan to reform the film and TV tax reliefs into an expenditure credits system ahead of a global restructure of the tax sector.

But some producers have expressed disappointment nothing has been introduced to further support the independent sector.

Under the new Audio-Visual Expenditure Credit (AVEC), there will be a very slight increase in relief for film and TV, and a bigger boost for Animation Tax Relief (ATR) and Children’s TV Tax Relief (CTR).

Films and high-end TV programmes will have a headline credit rate of 34%. This equates to 25.5% in actual relief – a small increase on the 25% relief currently available. It remains capped at 80% of core expenditure.

These changes are being made pre-emptively to protect the creative sector from global tax reform after the UK adoption of the OECD Pillar 2 framework, intended to stop profit shifting to low-tax jurisdictions and to stymie aggressive tax planning by multinational companies.

The relief rate increase (to 34% and 39%) reflect the fact that the expenditure credit, under the new Pillar 2 rules, will be taxable.

“It is incredibly positive that during tight economic times, the government are vigilant of how the film and TV industry is moving,” said Stephen Bristow, partner, Saffery Champness LLP, who has been deeply involved in the policy development of independent UK film and television. “The Treasury is thinking forward and anticipating the possible negative consequences and taking action to make sure that those negative consequences don’t happen.”

“It is good that somebody spotted it early rather than find out later,” added Dave Morrison, partner at Nyman Libson Paul, of the swift government action to protect the audiovisual tax reliefs.

The new system is already in place for R&D (research and development) tax relief. According to Bristow, it is “straightforward to use” and “as clear, simple and smooth as our current incentive is”.

The government is expected to provide further detailed guidance about the relief over the course of the summer when the draft legislation will be published.


AVEC is due to start on January 1, 2024. However, film and TV productions that have begun but not concluded principal photography will still be able to claim relief under the existing system until March 31, 2027.

“It’s not a given these things will work smoothly. Let’s not underestimate the amount of work that will have to be done on that,” said Adam Minns, executive director of COBA, the UK industry body for digital, cable and satellite broadcasters.

Independent film producers are asking why animation and children’s TV are now eligible for a higher credit rate of 39% while they will receive 34%.

“Any increase in the tax credit is good news but what we were really hoping was that the independent [film] sector would have been granted a bonus in that realm and that hasn’t happened,” said producer Rebecca O’Brien of Sixteen Films, whose credits include Ken Loach’s Cannes hopeful The Old Oak.  

“The new system is good for corporate Britain, to entice inward investment, but it doesn’t solve the problem where we as the independent sector, which is the R&D sector of the industry if you like, are finding it difficult to access cast and crew to work on our own projects because they’re all sucked into the machinery of the industrial side of the business.” 

O’Brien expressed her “disappointment” the independents hadn’t been “singled out for special treatment” in order to address the “market failure in our sector. Of course, I’m grateful for anything we can get frankly but I also fear that this doesn’t address that particular issue.”

However, John McVay, chief executive of trade body Pact, who has spearheaded calls for an enhanced tax credit for independent producers, argued it was important to recognise the government’s continuing support of the sector at this time.

“I love all my members and my producers dearly but sometimes they have to think not just about them. In the context of where we are in the UK economy, when nurses are on strike, doctors are on strike, cost of living is a tragedy, people’s living standards haven’t been improved since 2008, we have to remember we are very privileged,” he said.

“We have an intervention by the UK government which the taxpayer funds up to about £900m a year. We have to be conscious of that. Yes, the tax credit generates huge benefits to the UK economy, it sustains high-level jobs but we always have to take the view we should be grateful we are still getting support of the British taxpayer and the current government.”

Citing the enhanced support for children TV and animation, McVay added: “The government will always listen to compelling evidence where there is a market failure or where the purposes of an intervention are not delivering as they should. That’s the case we will continue to make to government to support film.”

Minns, though, pointed out that “every single bit of reporting done on this, every single independent analysis commissioned by the government, the BFI or industry shows that the UK gets back the value of the tax credit or tax credit – and then some.”

“Arguably, the biggest success story in the UK sector in the last decade has been the growth in production which is underpinned by the tax credit,” Minns said.


The industry was clearly caught out by yesterday’s news. McVay acknowledged “no-one knew yesterday that [chancellor] Jeremy Hunt was going to say anything about the tax credits. We all thought it would be much later. Clearly, because they’re introducing this new system on the first of January, they have done it now. That was a surprise given the consultation was very brief, it was [held] over the beginning of the year and it was only a few weeks ago the consultation closed.”

UK industry representatives have been scrambling to reassure US studios and streamers that the changes won’t affect them adversely. The Treasury has had “active conversations” with the MPAA and the studios about the new system.

“The studios and streamers are constantly in touch with us because they are shooting so much in the UK,” said Adrian Wootton, chief executive of the British Film Commission of the ongoing attempts to keep them up to speed on the changes.

Further reforms may be made later to the relief system. In the consultation document, the government confirmed it is considering further targeted support for visual-effects work. This has been welcomed by leading figures in the VFX industry. William Sargent, chairman of the Framestore Company 3 Group, welcomed the decision to look at the “consequences the 80% cap have on qualifying expenditure.”

Significantly, the government also decided to maintain the £1m per hour expenditure threshold for high-end TV after listening to industry concerns about proposals to raise it. Additonally, it is also reducing the minimum slot length required for a high-end TV programme to be eligible for a tax credit from 30 minutes to 20 minutes, applied on an episode-by-episode basis. Previously, shorter episodes that were commissioned together could group up to meet the threshold for £1m average core spend per slot hour. 

“That £1m was absolutely critical to British domestic production,” said McVay. “It was completely irrelevant for inward investment because most of their [streamers and studios’] shows are way above that cost per hour but a lot of our comedies are made at, maybe, £1.2m. If government had raised the threshold to, say £1.5m, we would have struggled get the money or those shows would just not have been made.”

His remarks were echoed by Minns who said if the threshold had been raised, “there would be a risk they [the shows] would not get made at all.”

One group that might be affected adversely is the video games industry. Under the new system, relief will only be available for work done in the UK and will no longer be able to claim EEA expenditure.

In the longer run, it is possible other countries will now look to amend their film and TV tax relief programmes in the same way as the UK as they look to conform to the Pillar 2 framework. 

In the UK, meanwhile, industry figures have applauded the government’s early intervention to “future proof” the audiovisual tax reliefs.

“The fact is that the government keeps on stepping in and helping this industry whether it’s the production restart scheme or whether it’s the cultural recovery fund or whether it’s updating these tax reliefs. At every instance, you have to say that the government steps up, listens to the industry and takes action,” Bristow noted.