Creative Industries: AVEC worked example (with losses)

How do you calculate the Audio-Visual Expenditure Credit (AVEC) and Video Games Expenditure Credit (VGEC)?  How to determine the credit repayable to the company if it incurs losses?

This is a freeview 'At a glance' guide to calculating the credit repayable to the company in the event of losses, when claiming the Audio-Visual Expenditure Credit (AVEC) or Video Games Expenditure Credit (VGEC).

For detailed guidance on the conditions to qualify for AVEC and VGEC, please refer to the subscribers' guide: Creative Industries: Audio-Visual Expenditure Credit (AVEC) & Video Games Expenditure Credit.

For illustrative purposes, the following example provides a calculation of the AVEC. AVEC and VGEC are largely calculated in the same way.

Example 

A Ltd is a qualifying company with a qualifying film production, that began on 1 April 2024. 

A Ltd opts to claim AVEC for the year-end 31 March 2025. 

During the year-end 31 March 2025, A Ltd incurred £1,000,000 of relevant global expenditure, of which £150,000 was not UK expenditure. 

A Ltd had not incurred any relevant global expenditure before 1 April 2024. 

A Ltd’s tax-adjusted loss for the year-end 31 March 2025 was (£200,000) before taking into account any claim under AVEC.

A Ltd is a standalone company and has no other outstanding liabilities payable to HMRC.

Calculate A Ltd’s AVEC

Step 1: Ascertain the total of the company's relevant global expenditure

• Find the amount of Relevant global expenditure incurred on the production up to the end of the accounting period for which the company is making a claim.
• This will include any expenditure incurred on the same production in previous accounting periods. 

Total relevant global expenditure £1,000,000

Step 2: Deduct any expenditure that is not UK expenditure 

UK expenditure is expenditure on goods and services that are used or consumed in the UK. 

Deduct from step 1, any expenditure that is not UK expenditure. £850,000 (£1,000,000 - £150,000). 

Step 3: Calculate the qualifying expenditure to date 

Take the lower of 

• Step 2: £850,000 
• 80% of Step 1: £800,000 (£1,000,000 x 80%). 

Qualifying expenditure to date is £800,000

Step 4: Calculate the qualifying expenditure for the period

Deduct from Step 3 the amount (if any) of the company's qualifying expenditure to date in the prior accounting period for which it claimed an expenditure credit. 

A Ltd's production commenced at the start of the accounting period 1 April 2024. A Ltd had not incurred any relevant global expenditure before this date. No adjustment is required.

A Ltd's qualifying expenditure for the period is £800,000. 

Step 5: Calculate the credit 

Multiply the Step 4 amount by the relevant percentage. The relevant percentage can be found here: Creative Industries Tax Reliefs: At a glance

A Ltd is producing a qualifying Film, the relevant percentage is 34%. 

£272,000  (34% x £800,000)

Calculate the credit payable by HMRC to A Ltd

Step 1: The amount of credit is set against A Ltd's corporation tax liability for the accounting period 

Step 2: Restrict the credit  

The credit is restricted to the lower of:

• £254,000 (Amount of AVEC remaining after step 1 £272,000 - £18,000).
• £204,000 (£272,000 x ( 1- 0.25) expenditure credit less CT main rate 25%). 

The credit is restricted to £204,000.

The £50,000 (£254,000 - £204,000) may be surrendered for group relief or carried forward to the next accounting period. 

Step 3 The amount remaining after step 2 is to be applied in discharging any liability of the company to pay Corporation Tax for any other accounting period.

A Ltd does not have any other outstanding liabilities payable to HMRC.

Step 4: If the company is a member of a group, it may surrender the whole or part of any amount remaining after step 3 to any other member of the group.

A Ltd is a standalone company.

Step 5: Any amount remaining after step 4 is to be applied in discharging any other liability of the company to HMRC. 

A Ltd does not have any other outstanding liabilities payable to HMRC.

Step 6: Any amount remaining after step 5 is to be paid to A Ltd. 

The credit payable to A Ltd is £204,000. 

Restrictions 

• No credit is payable if the company is in administration or liquidation.
• No credit is payable if certain tax matters are outstanding.

Useful guides on this topic

Creative Industries: Additional Information Form (AIF)
What are the additional information requirements? When should you complete the Additional Information Form (AIF)? What information is required? 

Creative Industries: Audio-Visual Expenditure Credit (AVEC) & Video Games Expenditure Credit (VGEC)
Audio-Visual Expenditure Credit (AVEC) will replace Film Tax Relief (FTR), High-End TV Tax Relief (HETR), Animation Tax Relief (ATR), and Children’s TV Tax Relief (CTR). Video Games Expenditure Credit (VGEC) will replace Video Games Relief (VGTR).

Creative Industries: AVEC worked example
How to calculate the Audio-Visual Expenditure Credit (AVEC) and Video Games Expenditure Credit (VGEC)? 

Creative Industries: AVEC worked example (with losses)
How to calculate the Audio-Visual Expenditure Credit (AVEC) and Video Games Expenditure Credit (VGEC)?  How to determine the credit repayable to the company if it incurs losses?

Creative Industries: Film Tax Relief and Television Tax Relief
Film Tax Relief (FTR), High-End TV Tax Relief (HETR), Animation Tax Relief (ATR) and, Children’s TV Tax Relief (CTR) are part of the UK's suite of creative industry tax reliefs. 

Creative Industries: Video Games Tax Reliefs (VGTR)
What is Video Games Tax Relief (VGTR)? Who can claim VGTR? When will VGTR cease? 

Creative Industries: Theatre Tax Relief (TTR)
What is Theatre Tax Relief (TTR)? Who can claim it? What are the conditions?

Creative Industries: Orchestra Tax Relief (OTR)
What is Orchestra Tax relief? What are the qualifying conditions? What is the rate of relief?

Creative Industries: Museum & Gallery Exhibitions Tax Relief (MGETR)
What is Museum & Gallery Exhibitions Tax Relief? When does it apply?

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