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Understanding the Eligibility Criteria

To qualify for UK film tax reliefs, a production must meet several key criteria. These requirements ensure that the incentives are used to support projects with a significant connection to the UK.

• Be Certified as British: This is a fundamental requirement. A film can be certified as “British” in one of two ways:
  • Passing the Cultural Test: This is a points-based test administered by the British Film Institute (BFI). It assesses a film’s cultural connection to the UK across four sections: cultural content, cultural contribution, cultural hubs, and cultural practitioners. A minimum of 18 out of a possible 35 points is required to pass.
  • Qualifying as an Official Co-production: The UK has co-production treaties with many countries, as well as being a signatory to the European Convention on Cinematographic Co-production. If a film is produced under one of these treaties, it can be certified as a British film, allowing it to access national funding and incentives in each co-producing country.
• Intended for Theatrical Release: The film must be intended for public exhibition in a commercial cinema.
• UK Production Company: The film must be produced by a company that is registered and liable for corporation tax in the UK. This company must be actively involved in the production, from pre-production through to delivery.
• Minimum UK Expenditure: At least 10% of the film’s core expenditure (the costs of pre-production, principal photography, and post-production) must be “UK expenditure”—that is, costs incurred on goods and services “used or consumed” in the UK.

The Audio-Visual Expenditure Credit (AVEC)

The AVEC is the new framework for the UK’s film tax incentives, replacing the old system for productions that began principal photography after April 1, 2025. It offers a taxable credit at a rate of 34% on qualifying expenditure. This is a significant improvement over the previous rate and, after accounting for corporation tax, equates to an effective credit of 25.5% on qualifying expenditure.

A key feature of the AVEC is that the credit is capped at 80% of the total core expenditure. This means even if a production spends 100% of its budget in the UK, the credit will only be applied to a maximum of 80% of the total core costs.

For animated films and children’s TV programs, the AVEC rate is even higher, at 39%, translating to a net rate of 29.25% after tax.

The Independent Film Tax Credit (IFTC)

Introduced in 2024, the IFTC is a specific relief aimed at boosting the UK’s independent film sector. It’s a special stream within the AVEC, available to films with a total production budget of up to £23.5 million.

• Enhanced Rate: The IFTC offers an enhanced gross rate of 53% on qualifying expenditure, which equates to a net credit of 39.75% after corporation tax.
• Budget Cap: The enhanced credit is capped at £4.77 million, which is the effective credit on £15 million of qualifying expenditure.
• Qualifying Conditions: In addition to meeting the standard AVEC criteria, films must satisfy at least one of the following conditions: have a UK writer or director, or be an official UK co-production.

Special Incentives and How to Claim

Beyond the general AVEC and IFTC, the UK offers specific incentives for visual effects (VFX). Starting January 1, 2025, qualifying VFX costs will receive an enhanced net rate of 29.25%, and the 80% cap on total core expenditure will not apply to these costs. This is a significant move to attract more high-end VFX work to the UK.

To claim these reliefs, a production company must first apply to the BFI for an interim certificate of qualification, which can be done even before production is complete. Once the film is finished, a final certificate must be obtained. The company can then use this certificate to make a claim for the tax credit on its Corporation Tax return, along with an Additional Information Form (AIF) that provides a detailed breakdown of expenditure.

Navigating these tax reliefs can be complex, but their benefits are substantial. They not only provide a significant financial return but also help to create a sustainable and globally competitive filmmaking ecosystem within the UK.