Independent Film & AV Tax Credits

Background

At Spring Budget 2024, the Chancellor announced the UK Independent Film Tax Credit (IFTC). Under IFTC, eligible films will be able to opt-in to claim enhanced Audio-Visual Expenditure Credit (AVEC), at a rate of 53%, on their qualifying expenditure.  

What are the conditions to qualify?

To be eligible for the IFTC, films will need to have production budgets (excluding marketing and distribution) of up to £15 million.  Films will also need to meet criteria set out in a new British Film Institute (BFI) test, with the expectation that films will need to meet at least one of the following conditions:

• Have a UK writer; or

• Have a UK director; or

• Be certified as an official UK co-production.

Qualifying productions must have started principal photography on or after 1 April 2024, and only expenditure incurred on or after 1 April 2024 can be claimed.

If claiming the IFTC, separate claims for the visual effects and animation uplifts cannot be made. This is because the IFTC rate of 53% has been specifically calculated based on independent film sector trends. The IFTC will not be available for TV programmes. As with the standard Audio-Visual Expenditure Credit rate, for a film to qualify for IFTC it must be intended for theatrical release.

The IFTC will be an optional enhanced tax credit for productions that already meet the conditions of AVEC. These include (but are not limited to):

• Productions must be certified as culturally British by the BFI;

• Productions must be made by a UK production company;

• At least 10% of a production’s core expenditure must be used or consumed in the UK. Provided this threshold is exceeded, AVEC can then be claimed on qualifying UK core expenditure (further details below).

How will the credit be calculated?

The credit will be calculated in the same manner as AVEC on “core expenditure”: expenditure which is incurred on production activities, and not ancillary activities such as marketing or distribution.

The BFI will assess film budgets to certify that IFTC films meet the budget condition. If a film’s budget subsequently exceeds £15 million, the production company can choose either to continue to claim IFTC at 53% up to a maximum of £6.36m credit before tax, or choose instead to claim AVEC at 34% on all its qualifying expenditure.

When can it be claimed?

Claims can be submitted to HMRC from 1 April 2025 onwards, in respect of expenditure incurred from 1 April 2024, provided a film began principal photography after 1 April 2024. When submitting claims, companies must submit an additional information form for the relevant period, accompanied by their BFI certificate. The claim will then be submitted as part of the Company Tax Return.

Cold foods which are zero-rated if sold as a takeaway, for example:

• Cakes

• Plain biscuits (not chocolate-covered)

• Fruit and vegetables

• Bread and bread rolls

• Flapjacks or cereal bars

• Salads, 

• Pastries allowed to cool to room temperature

• Cold sandwiches and wraps 

Key Points for Cafes with VAT Compliance

• Train staff to categorize food (hot/cold, eat-in/takeaway) for accurate VAT billing.

• Clearly label items with VAT status, especially for items taxed differently depending on consumption (e.g., sandwiches).

• Program cash registers to add VAT correctly for each scanned item.

• Maintain an updated product list with VAT classification for each item.

• Mixed orders with standard and zero-rated items require extra attention.

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