Hot on the heels of the introduction of the Audio-Visual Expenditure Credit (AVEC) and the Independent Film Tax Credit (IFTC), last week’s Budget brought more positive news for the UK’s creative sector by way of confirmation of an additional visual effects (VFX) relief.

The UK Government announced that under AVEC, UK VFX costs in film and high-end TV will receive an enhanced headline rate of 39% (which equates to an effective rate of 29.25% post corporation tax), a 5% increase on the standard headline AVEC rate, in respect of qualifying UK VFX costs incurred on or after 1 January 2025.

For once the small print makes for even better reading, as it has also been confirmed that; (i) the 80% cap on UK core expenditure will be removed for UK VFX costs; and (ii) the Government has listened to industry feedback and amended the definition of “visual effects” to “work consisting of the use of computer technology to create or alter images for the inclusion in the film or programme”, meaning that costs associated with generative AI will be within the definition of ‘qualifying expenditure’, and not excluded as had been previously proposed.

Whilst we await publication of the draft legislation for the detailed provisions, we’ve summarised what we know so far in the attached note here.