Navigating tax reliefs for the film and media industry

Productions live or die on cashflow, so understanding tax reliefs for the film and media industry can make the difference between a green-lit schedule and a stalled shoot. The rules have shifted in the 2025/26 tax year, with the Audio-Visual Expenditure Credit (AVEC) now the main route for film, high-end TV, animation and children’s TV. Rates are generous – 34% for film and high-end TV, 39% for animation and children’s TV, with a higher 39% rate for eligible UK visual effects (VFX) costs from 1 April 2025 – but the detail matters (HMRC, 2025). Add in the British certification requirement and the additional information form for claims, and it’s easy to miss value or fall foul of process (HMRC, 2024).

Why this matters now: sector conditions remain mixed. In July 2025, output in “motion picture, video and TV programme production, sound recording and music publishing” fell 5.6% month-on-month, a reminder that budgets and margins are under pressure (ONS, 2025). Across the wider economy, business creations in Q3 2025 were 3.9% lower than a year earlier, which affects commissioning and supplier pipelines (ONS, 2025). Well-planned relief claims help smooth cashflow, protect margins and unlock headroom for post, marketing or contingency. In this article, we set out what qualifies, how the cultural test works, where producers trip up, and practical steps to maximise tax reliefs for the film and media industry without slowing production.

Understanding the AVEC framework

AVEC is a taxable, above-the-line credit based on qualifying core expenditure. Standard rates are 34% for film and high-end TV, 39% for animation and children’s TV. From 1 April 2025, eligible UK VFX costs attract 39% and are excluded from the usual 80% cap on core costs, improving the effective return for VFX-heavy shoots. Independent films may also access an enhanced rate for lower budgets under separate criteria published by the government.

Two practical points to anchor planning:

• British certification: You must obtain interim or final certification as a British film or programme to claim, typically via the cultural test or an official co-production route.
• Evidence pack: From April 2024, claims require an additional information form with detailed spend breakdowns. Build this into your cost report workflow from day one (HMRC, 2025).

The cultural test: What “British” means in practice

The cultural test awards points across content, cultural contribution, location, key talent and crew. You do not need a story set in the UK to pass, but you do need enough UK or EEA elements across the criteria. In practice, we see producers secure interim certification early, then lock final certification during post once credits and talent are fixed.

What to prioritise:

• Story/setting: UK or EEA settings, characters or subject matter help, but are not essential if other categories score.
• Talent and crew: Casting UK or EEA lead roles and hiring UK HODs adds points without creative compromise.
• Location and services: Using UK studios, physical production, post and VFX services contributes significantly.

Common pitfalls:

• Late certification: Waiting until delivery can delay the claim. Apply for interim certification as soon as you have a locked script and finance plan.
• Thin documentation: Keep contracts, call sheets and payroll data aligned to claim lines. Gaps here slow HMRC checks.
• Cross-border spend: Map any non-UK spend early so it does not dilute the qualifying base.

(For HMRC’s position on certification, see British productions in the Creative Industries Expenditure Credit Manual).

Maximising tax reliefs for the film and media industry: Practical levers

Reliefs are only as valuable as your ability to claim them promptly and in full. Build these into your production bible:

• Budget design: Front-load qualifying UK work where possible.
• =VFX costs: Use UK providers for work that meets the defined VFX categories to access the 39% rate from April 2025 – and benefit from the cap removal.
• Scheduling: Align milestone payments with claim windows to reduce borrowing needs.
• Documentation: Tag cost lines to AVEC categories at source, not at the end.
• PV setup: Keep a clean company per project with its own accounting, bank and payroll to streamline claims and audits.
• Cashflow modelling: Remember AVEC is taxable at the main Corporation Tax rate; model the net benefit and payment timings into your cashflow.

Claim process, timing and evidence

A clean claim runs on rails because finance and production speak the same language from prep:

• Pre-production: Interim certification. Apply early; keep evidence of British cultural test criteria.
• Production and post: Cost control. Maintain weekly cost reports mapping to AVEC headings, including VFX split-outs.
• Pre-delivery: Additional information form. Prepare the HMRC form alongside the final cost report to avoid rework (HMRC, 2025).
• Corporation Tax return: Submission. Include the AVEC calculation on the CT600, then offset the credit against Corporation Tax. Excess credit may be payable, subject to restrictions.

Timeframes vary with year-end, audit and HMRC checks. Build slack into your funding timeline and keep correspondence tidy to minimise queries.

Transitional rules and what’s changing in 2025/26

AVEC is replacing the older audio-visual reliefs during a transitional window. Productions commencing on or after 1 April 2025 must use AVEC, and all productions will be under expenditure credits from 1 April 2027. For 2025/26:

• Standard AVEC: 34% for film and high-end TV; 39% for animation and children’s TV.
• VFX uplift: From 1 April 2025, eligible UK VFX costs: 39% and outside the 80% cap.
• Certification and forms: British certification and the additional information form remain mandatory.

If you are mid-series or spanning finance years, map each block to the correct regime and document commencement dates clearly.

What the data says and how to respond

Two recent data points shape planning:

• Sector volatility: The ONS reports a 5.6% output fall in July 2025 for the combined “motion picture, video and TV, sound recording and music publishing” group, highlighting how quickly demand can shift.
• Macro backdrop: Business creations were 3.9% lower in Q3 2025 than a year earlier, which can feed through to commissioning and supplier liquidity.

Our take: lock in tax reliefs for the film and media industry early, keep documentation audit-ready, and design VFX workflows to capture the 39% rate where the creative brief allows. If you need a sounding board on structure, certification or modelling, you can learn more about how we support our clients here.

You do not need to memorise HMRC manuals to benefit from the current regime – but you do need to plan. AVEC remains generous in 2025/26, especially for animation, children’s TV and UK VFX, yet every claim stands or falls on certification and evidence. Build the cultural test into casting and crew decisions, tag spend to AVEC categories from the first PO, and prepare the additional information form alongside your cost report – not at the last minute. Keep an eye on production schedules, because commencement dates determine whether AVEC is mandatory, and VFX timing can improve your net return. If you are weighing co-production structures or independent film options, model the tax impact early so your financiers see the after-tax picture, not just headline rates.

We help producers, studios and post houses structure and deliver robust claims, integrate the cultural test, and forecast the net cash benefit with clear assumptions. If you want an experienced team to review your current slate or set up a clean process for your next shoot, speak to us about tax reliefs for the film and media industry.