U.K.’s 39% Audio-Visual Expenditure Credit Extended To Animated Features

In the draft legislation for an upcoming audiovisual finance bill, the U.K. government has revealed that its enhanced animation expenditure credit will be extended to include animated theatrical films in addition to tv programs.

In March, when the 39% (29.25% net after corporate tax) Audio-Visual Expenditure Credit (AVEC) was announced by Chancellor of the Exchequer Jeremy Hunt, only tv programs were included. This week, the draft legislation for the AVEC tax relief reform was published and it was revealed that the tax credit rate will also be extended to include animated theatrical films. The change will take effect on January 1, 2024.

Currently, animated films are only eligible to claim the country’s 25% Film Tax Relief. So starting next year, animated film productions will benefit from a 4.25% increase over the previous post-tax rate.

According to the draft legislation, the new tax changes are expected to be worth £5 million ($6.4 million) per year to U.K. creative sector businesses. The changes come shortly after the Creative Industries Sector Vision was published last month, which set a goal to grow U.K. creative industries by an extra £50 billion by 2030.

The updated draft legislation comes as the result of tireless campaigning on the part of Animation UK, which felt increasing external pressure as other key animation territories continued to improve their tax credit offers.

In a release announcing the changes, Animation UK executive chair Kate O’Connor said:

The resulting enhancement across the industry is set to supercharge its overall growth. Not only do these animations attract significant budgets (in the ballpark of £15m-£100m), but they also herald advanced technological breakthroughs, while offering long-term, sustainable employment opportunities for a workforce of up to 250 people throughout the entirety of a project’s lifespan. Overall, our animated content plays an immeasurable role in our nation’s soft power, driving exports, and promoting the uniqueness of U.K. creativity worldwide. Regarded as the zenith of our animated output, this inclusion of animated features is not just beneficial, but fundamentally essential to the vitality of the industry. The animation sector as a whole stands to reap immense benefits from this progressive step.

Britt Gardiner, chief operating officer at Locksmith Animation and chair of the Animation UK Features Working Group, added:

As an independent producer of high-quality animated features for global audiences Locksmith Animation is delighted that the AVEC animation uplift is being applied to theatrical features. This incentivizes U.K.-based production at the very highest level of animation; leading to ongoing investment in developing the talent and technology to produce big-budget world-class animated films that promote U.K. creativity across the world.