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

The new Audio-Visual Expenditure Credit (AVEC) will replace the current film, high-end TV, animation and children’s TV tax reliefs. Under AVEC companies will instead receive an above the line tax credit based on qualifying expenditure. These will be taxable.

The new Video Games Expenditure Credit (VGEC) will replace the current Video Games Tax Relief. Under VGEC, companies will instead receive an “above the line” tax credit based on qualifying expenditure. These will be taxable.

More information about Audio Visual and Video Games expenditure credit can be found here.

If you’re a company claiming tax relief, you can claim Audio-Visual Expenditure Credit (AVEC) and Video Games Expenditure Credit (VGEC) on expenditure incurred from 1 January 2024 on new tax credit rates:

Film - 34%

High-end TV programmes - 34%

Children’s TV programmes - 39%

Animation - 39%

Video Games Expenditure Credit - 34%

Please check the conditions for qualifying companies, production and expenditure within HMRC guidance on Audio-Visual Expenditure Credit (AVEC) and Video Games Expenditure Credit (VGEC).

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

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 user for correct calculation and declaration in relevant section of CT600 based on HMRC guidance. Details of steps are provided below.

How do I enter qualifying Expenditure for Audio-Visual and Video Games Credit on CT600

Simple step mode

1. Go to CT600 Core> CAs and Enhanced Expenditure > Creative qualifying expenditure and/or additional deduction (box 665).

2. If your accounting period ends on or after 1 January 2024 and the period starts before 1 April 2024 then use the link provided inside the wizard screen to enter Audio Visual and Video Games qualifying expenditure. Once you use the link provided in the new paragraph where it says “here” this will take you to Creative tax credit wizard where you will be entering data. All values for AVEC/VGEC qualifying expenditure will be populated in box 665.

3. If the accounting year ending falls on or after 1 April 2024 then the wizard provided with box 665 will assist. The screen should automatically update based on your accounting year.

4. Inside the wizard use separate individual wizards for Audio Visual and Video games to enter qualifying expenditure

Audio Visual Expenditure Credit Wizard

Select the type of production from the drop-down list and the rate will populate automatically. After you enter qualifying expenditure, TaxCalc will automatically calculate the expenditure credit.

Video Games Expenditure Credit (VGEC) Wizard

You can optionally enter the name of the production.  After you enter the qualifying amount, the rate will populate automatically and TaxCalc will calculate expenditure credit.

5. The AVEC/VGEC individual wizards are linked to “Creative qualifying expenditure and/or additional deduction wizard” (Box665), Tax reconciliation>Creative tax credit (Box 540) and Overpayments and repayments>Total payable creative tax credits (Box885). Once data is entered within the individual wizards, the values will be transferred to all three relevant boxes.

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

Simple step mode

1. Go to Tax reconciliation>Creative tax credit.
2. Use the wizard provided for creative tax credit.
3. Inside creative tax credit wizard individual wizard has been provided to facilitate input for Audio Visual and Video Games expenditure credit as shown above.
4. Once data has been entered in individual wizards for Audio Visual and Video Games, the calculated value will be pulled through in total creative tax credit box.

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.

We have updated our Box 885 by connecting with wizard to facilitate user enter data for payable creative tax credits (excluding AVEC and VGEC) and Payable Audio-Visual/Video Games Expenditure Credits (AVEC/VGEC).

New updated screen for repayment section is as below:

Inside the wizard you will see simple step mode screen:

There is a wizard for calculating AVEC/VGEC payable expenditure credit wizard.

Step for calculating AVEC/VGEC payable expenditure credit

Screen 1

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.

Screen 2

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.

Screen 3

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.