Audio-Visual Expenditure Credit (AVEC) and Video Games Expenditure Credit (VGEC)

The new Audio-Visual Expenditure Credit (AVEC) and Video Games Expenditure Credit (VGEC) replaces the current creative tax reliefs for film, high-end TV, animation, children’s TV and video games. Under AVEC and VGEC companies will receive an above the line tax credit based on qualifying expenditure which will be taxable. A company claiming the credits will be able to claim on qualifying expenditure incurred from 1 January 2024. The rates are:

• Film - 34%

• High-end TV programmes - 34%

• Children’s TV programmes - 39%

• Animation - 39%

• Video Games Expenditure Credit - 34%

From 1 April 2024, all claims must be accompanied by an HMRC online additional information form. This will allow you to provide the necessary evidence to support your claim.

We have updated TaxCalc to facilitate the correct calculation of the tax credits and a reminder for the completion of the additional information form.

How do I claim Audio-Visual and Video Games Expenditure Credit (AVEC) on CT600

Simple step mode

1. Go to Tax reconciliation > Audio-Visual expenditure credit (AVEC) and Video Games expenditure credit (VGEC) (box 541)

2. Click on the wizard for box 541

3. At the bottom of the page you will see the expenditure credit boxes for AVEC and VGEC under 'Amount of expenditure credit'

4. Click on the wizard symbol next to the box for AVEC or VGEC

5. Enter the qualifying amounts of expenditure after entering the type of production (AVEC) or description (VGEC)

6. The rates will automatically populate and the total for box 541 will automatically populate with the total credit

7. Go to Overpayments and repayments > Repayments for the period > Box 886 will show the payable credit 

8. Clicking on the wizard next to box 886 will display the steps used to calculate the amount of payable credit

9. If the payable credit has not already been entered into the accounts and resulting profit/(loss) in the CT600 computation, the gross amount payable should be entered into SimpleStep > CT600 Core > trade and professional income > Tax adjusted profit/(loss) - enhanced expenditure adjustments

How to work out payable Audio Visual and Video Games Expenditure Credit (AVEC)

Please note HMRC has not provided specified supplementary pages regarding Audio Visual and Video Games expenditure Credit yet, therefore TaxCalc has generated simple steps to facilitate calculation in the meantime. These steps will be accessible in simple steps mode Overpayments and repayments>Repayments for the period>Total payable creative tax credits.

Pre-step 1 restriction

Complete this section if you have brought forward from previous accounting periods and/or surrendered from group companies.

Step 1

Audio Visual and Video Games expenditure on which AVEC/VGEC is claimed in this accounting period can be entered using the wizard to select whether the expenditure has been made.

The Rate is determined for Film, animation, children programme, Drama, Video Games claim for this period will be complete automatically.

Step 2

If you have AVEC/VGEC remaining after step 1, the amount is reduced by applying a notional tax charge to it. The notional tax charge must be based on the main rate of Corporation Tax for the accounting period. This step restricts the potential payable element and ensures that loss makers receive the same net benefit as profit makers (the credit being taxable). This ensures that the total cash benefit for all claimants is equal to the expenditure credit, net of tax at the main rate of corporation tax. The ‘notional’ tax retained under this step is carried forward and available to reduce the corporation tax liability of a later period of the company. Credit amounts brought forward from a previous period are not liable to a further notional tax deduction.

Step 3

Any amount remaining after step 3 is used to discharge any outstanding corporation tax liabilities (due but not settled) of the company for any other accounting periods.

Step 4

If the company is a member of a group, it may surrender the whole or any part remaining after step 3 to any other group member.

Step 5

Any amount remaining after step 4 is used to discharge any other liability of the company to pay a sum to the Commissioners, for example VAT or liabilities under any contract settlement.

Step 6

The final amount remaining is payable to the company provided that the company is a going concern. Step 6, row one should only be completed if the amount is not payable under the going concern rules s1179CG and s1179CH CTA 2009.

The resulting payable amount will also be automatically populated in box 885 of the CT600.

Any carried forward and surrendered value will appear on screen 3:

How to account for the payable credit

The AVEC/VGEC are ‘above the line’ credits, which means they are taxable and will therefore need to be adjusted for in the accounts. The gross credit can be accounted for either as income or as a deduction against AVEC/VGEC expenditure.

An example of how to account for the credit:

Dr Corporation Tax (B/S) (amount to be offset against existing tax charge or to be paid by HMRC)
Dr Corporation tax charge (P/L) (tax charge on the gross amount)
Cr Other income (P/L) (gross amount)

More guidance about claiming Audio-Visual Expenditure Credit (AVEC) can be found here  and for Video Games Expenditure Credit can be found here.

The legislation can be found within Finance Act 2024 Schedule 2 Films, television programmes and video games.