Insights HM Treasury consults on new additional tax relief for visual effects


HM Treasury has published a consultation on additional tax relief for visual effects, following announcements at the Spring Budget (which we have previously commented upon here).

The consultation seeks views about the proposed design and application of the new policy, inviting comments on whether there are any unintended consequences that might flow from the current proposals. The document also provides the government’s response to submissions to the call for evidence on the UK visual effects sector, which ran from 22 November 2023 to 10 January 2024.

The consultation states that draft legislation will be published in the summer. In advance of that, the Government will work with the BFI to develop a process for accrediting visual effects costs as ‘genuine and incurred in the UK’. The draft legislation will also include a draft definition of ‘visual effects’ which industry will be invited to comment upon. The consultation states that the Government will use the BFI’s definition as a “starting point for the legislation” which is as follows:

the digital alteration of a film’s (or high-end programme’s) images. This will include the following activities carried out as part of Asset Build, Shots and Facility Overhead, but not those activities relating to principal photography: Pre visualisation, Concept Design, Computer Generated Images (CGI), Character/Creature Animation, Colour Correction, 2D Compositing, 3D Animation, 3D Modelling, Software Development, Digital Intermediate, Stereo Conversion, Virtual Sets/Studio Motion Capture, Digital Matte Painting, Lighting and Rendering, Images as well as supervision, support and management of the artists and individuals engaged in this activity”.

As the consultation explains, the Government “agrees with the principle that visual effects involves the digital alteration of filmed footage”. This will mean that special effects (i.e. those created physically rather than digitally) will be excluded from the additional tax relief, as will Generative AI and animated TV programmes and animated films.

The consultation will close on 22 May 2024, and the Government states that it especially invites comments from “visual effects companies and film and high-end TV production companies” as well as accountants, tax advisers and lawyers.

To read the consultation in full, click here.