The UK’s screen industry has long been a global leader in visual effects (VFX), known for its innovation and creativity. Now, with improved tax incentives, the sector is poised for additional growth. The UK Screen Alliance’s advocacy has paid off, as the new uplift to the Audio Visual Expenditure Credit (AVEC) allows VFX spending to attract a net rebate of 29.25%, exempt from the overall 80% cap on eligible spending.
A Game-Changer for the UK’s Screen Industry
Previously, productions shooting in the UK would often hit the cap on available rebates, pushing VFX work to other territories with more favorable incentives. With the new system in place, productions are incentivized to not only shoot in the UK but also conduct their VFX work domestically. This change is estimated to drive an additional $218 million (£175 million) in annual VFX spending, creating 2,000 new jobs directly and 800 more indirectly.
“This is effectively free growth for the UK,” says Neil Hatton, MBE, CEO of UK Screen Alliance. “The additional economic activity created will cover the cost of the incentives while cementing the UK’s position as a global hub for high-quality VFX.”
How the Uplift Works
To qualify for the VFX uplift and cap exemption, productions must meet AVEC’s eligibility requirements. While there is no specific minimum spending threshold for VFX alone, productions must spend at least 10% of their total budget in the UK and meet British Cultural Test or co-production criteria. Crucially, tax relief on VFX is available even if no principal photography occurs in the UK, as long as the VFX work is performed domestically.
-
Key Benefits:
-
25.5% relief on filming and other non-VFX costs (up to 80% of total budget).
-
29.25% rebate on VFX spend, exempt from the 80% cap on total eligible costs.
-
Available for VFX activity completed in the UK starting January 1, 2025, with claims applicable from April 1, 2025.
-
Boosting Independent Film Production
While the VFX uplift is a significant win for larger productions, independent films with budgets under $28.8 million (£23.5 million) can benefit from the Enhanced AVEC, or Independent Film Tax Credit (IFTC). This provides a net rebate of up to 39.75% on eligible UK spending, capped at $5.86 million (£4.77 million).
However, the VFX uplift cannot be combined with the IFTC. For productions with budgets between $22 million and $28.8 million (£18 million and £23.5 million) and significant VFX costs, it may be advantageous to transfer to the AVEC. By doing so, the VFX uplift and cap exemption could result in a higher overall UK rebate.
Unlocking New Opportunities for VFX
This landmark incentive system marks a new chapter for the UK’s VFX industry. With productions now encouraged to invest in award-winning VFX talent within the UK, the economic and creative benefits are immense. The move reinforces the UK’s reputation as a world leader in the screen industry while driving significant job creation and inward investment.
Takeaways for Filmmakers and Producers
-
Productions must meet the AVEC qualification criteria to claim the VFX uplift.
-
Tax relief is available for VFX performed in the UK, regardless of principal photography location.
-
The VFX uplift offers a net rebate of 29.25% and is exempt from the 80% cap on eligible spending.
-
For independent films, the IFTC provides up to 39.75% relief but without the VFX cap exemption.
