The government announced changes to the AVEC in the Spring Budget 2024. From April 2025, the rate of the tax credit will be increased by five percentage points to 39%. The 80% cap on qualifying expenditure will also be removed. The government is consulting on the design of the relief. 

In its response to the consultation, ICAEW’s Tax Faculty has reported that members welcome the changes and are pleased with the policy decisions in the consultation document. However, further guidance and clarification would be welcome, particularly around the definition of visual effects. For example, members would like to see more guidance on the distinction between special effects versus visual effects.

ICAEW is concerned that there may be a higher administrative burden on businesses as they will need to track audio-visual costs and visual effects costs separately. This might be quite involved in practice, and the record-keeping could be quite onerous. For some taxpayers, the amount of the credit as compared to the level of administration and tracking required may mean that making a claim is not cost effective.

HMRC has published guidance on claiming the AVEC.