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Learn how new UK VFX tax relief changes boost claims by removing the cap and increasing the rate of relief.
The UK's visual effects (VFX) industry has long been a cornerstone of our creative sector, contributing significantly to film and television productions both domestically and internationally.
Recognising the importance of this industry, the UK government has introduced enhanced tax relief measures aimed at bolstering the VFX sector's competitiveness and encouraging further investment.
Historically, the UK has offered various tax incentives to support its creative industries, including film and television production. These incentives have played a crucial role in attracting international productions and fostering local talent.
However, there is an 80% cap on eligible UK costs which puts a dampener on this British incentive. With both the elapsing Film and Television Tax Relief schemes, as well as the incumbent Audio-Visual Expenditure Credit (AVEC) scheme, companies can claim the lower of their:
With 20% of your UK costs ineligible for tax relief, some companies found an incentive to outsource 20% of their costs to cheaper service providers abroad. One of the most portable aspects of film and TV development is VFX.
Hence, the government’s efforts to bring home VFX work and ensure the continued success of the British film and TV industry.
HMRC announced edits to the Audio-Visual Expenditure Credit (AVEC) scheme; all previous schemes being phased out remain unchanged.
Productions can now benefit from a higher percentage of relief on qualifying VFX costs, making the UK a more financially attractive location for such work. Where the rate under the AVEC scheme is usually 34% for standard film and TV development, this has increased to 39% for VFX costs.
For children’s TV and animation producers, who already benefited from the 39% rate, there is still some good news. HMRC announced the removal of the 80% cap as it pertains to VFX expenditure. Removing this cap for VFX costs specifically means that productions can now claim relief on the full extent of their qualifying VFX expenditure.
These rules will only be available to companies with a final certificate from BFI for their production (or abandoned productions). This is intended to deter abuse of the scheme.
Claims will be accepted for their full VFX costs at a higher rate when they are made in the completion period (or any subsequent period), i.e., the accounting period when the production is completed.
For VFX vendors to be eligible, the person carrying out the VFX work must be based in the UK; their nationality or the nationality of the company they may work for does not matter, only where they physically carried out the work.
Eligible activities include:
It is also expected that claimants will need to provide additional evidence to verify their VFX costs, again to prevent abuse of this offering. It's essential for productions to maintain detailed records of these expenditures to substantiate their claims.
The enhanced VFX tax relief measures are set to take effect for expenditure incurred from January 1, 2025. Productions can begin claiming the new relief from April 1, 2025.
Productions looking to claim the enhanced VFX tax relief should follow the usual claim process, which involves preparing detailed documentation of qualifying expenditure to calculate your Audio-Visual Expenditure Credit.
You will be asked when filling out the additional information form if you want to claim the additional credit. When calculating the value of your claim as a whole, therefore, you should exclude VFX costs as they are treated separately in the form.
You’ll have to provide the amount of additional credit (i.e., your VFX costs) in a separate box, as well as the number of vendors involved in the production’s VFX. Companies, freelancers and partnerships should be included, although multiple individuals who were hired can be counted as a single vendor. Any subcontractors hired through the vendor don’t need to be included.
For each vendor, you should then provide:
You can enter up to 10 vendors on the AIF form; any others should be included in a document that is uploaded with the AIF.
The enhanced tax relief is a game-changer for local VFX studios across the UK. With productions now able to claim relief on a broader range of expenses, there's a renewed incentive to keep more post-production work within the country.
More work for studios directly translates into more jobs. But it's not just about quantity—it's about quality too. With increased demand, there's a growing need for highly skilled professionals, from digital compositors to simulation artists. In the long term, this could establish the UK as a global leader in VFX talent and innovation.
Looking forward, the future seems bright for UK’s VFX scene. With a mix of government support, industry enthusiasm, and a pool of emerging talent, the UK is positioned to lead the next wave of VFX excellence.
We’ve written a full guide to claiming the Audio-Visual Expenditure Credit, from qualifying to submitting your claim. You can download your free copy here.
If you want to discuss your claim with the experts at Myriad, get in touch! We always love to chat creative tax reliefs!
Learn how new UK VFX tax relief changes boost claims by removing the cap and increasing the rate of relief.
Understand how to calculate UK creative tax reliefs and maximise your claim—covering film, TV, animation, video games, theatre, and more.
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