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Section 1179EC Corporation Tax Act (CTA) 2009

Companies which incur visual effects (VFX) expenditure on film and TV productions may be able to claim an additional amount of expenditure credit, on top of the main expenditure credits calculated in accordance with Chapter 3 of Part 14A CTA 2009 (for which, see CREC060100 onwards). In this guidance, the main, ‘regular� expenditure credits are referred to as Chapter 3 credits. The same term is used in the legislation.

Companies can claim additional credit if they incur relevant VFX expenditure on:

• a high-end TV programme (CREC023000)
• a film which is not an animation (CREC024000) or an independent/certified low-budget film (CREC021100)

These are the types of productions that have a relevant percentage of 34% for the purposes of calculating Chapter 3 credit (CREC061300).

Relevant VFX expenditure must:

• meet the definition of relevant global expenditure (CREC051000)
• be UK expenditure (CREC054000)
• be incurred on relevant VFX work that is carried out in the UK

Relevant VFX work means work consisting of the use of computer technology to create or alter images for inclusion in a film or TV programme. Please see CREC061420 for more details.

Claims only to be made once a production is completed or abandoned

Claims to additional credit can only be made for the completion period of a production, or for post-completion periods. The completion period is the accounting period in which the film or TV programme is completed or abandoned. CREC032000 explains when a film or TV programme is completed, and CREC033000 covers the meaning of ‘abandoned�.

For pre-completion periods, relevant VFX expenditure is relieved as normal, as part of the calculation of Chapter 3 credit(s). The additional credit is then given in the completion or post-completion period and applies to all relevant VFX expenditure incurred on the production, including any amount incurred in pre-completion periods.

Calculation of additional credit

Qualifying relevant VFX expenditure is relieved at a relevant percentage of 39%. This is a 5% uplift compared to the standard 34% rate of Audio-Visual Expenditure Credit (AVEC) for films and high-end TV programmes.

In addition, relevant VFX expenditure is exempt from the 80% cap that applies to relevant global expenditure at step 3 of section 1179CA(1) CTA 2009 (CREC060100). This means that any relevant VFX expenditure which is restricted by the cap when calculating Chapter 3 credit(s) is fully relieved at 39% when calculating the additional credit.

The additional credit equals:

relevant VFX expenditure multiplied by 39%, minus:

• the adjusted VFX portion of previously claimed Chapter 3 credits, and
• any additional VFX credit claimed in previous periods

The adjusted VFX portion of previously claimed Chapter 3 credits is the amount of any Chapter 3 credit(s) already claimed that relates to relevant VFX expenditure. It is deducted to prevent companies from receiving the value of Chapter 3 credit twice on the same relevant VFX expenditure.

To calculate the adjusted VFX portion, companies must follow a series of steps:

1.ÌýÌýÌýÌý Identify the amount of relevant global expenditure that is UK expenditure incurred in the AVEC period

2.ÌýÌýÌýÌý Identify the amount of relevant VFX expenditure

3.ÌýÌýÌýÌý Find the amount of the reduction made by the 80% cap at step 3 of section 1179CA(1) CTA 2009, if any.

If the result of step 3 is zero, go to step 4, otherwise go to step 5.

4.ÌýÌýÌýÌý Multiply the proportion of UK expenditure in the AVEC period that is UK expenditure by total Chapter 3 credit(s) claimed. The result is the adjusted VFX portion of Chapter 3 credits. The remaining steps do not apply.

or

5.ÌýÌýÌýÌý Subtract the reduction you calculated at step 3 from relevant VFX expenditure.

If the result of step 5 is zero or negative, the adjusted VFX portion is zero. Otherwise, go to step 6.

6.ÌýÌýÌýÌý Calculate the adjusted VFX portion by multiplying the result of step 5 by 34%.

Please see CREC061430 for a full explanation of these steps and CREC061440 onwards for examples of how to calculate the additional credit.

Once calculated, additional VFX credits must be added to the profit/loss of the separate trade in the same way as Chapter 3 credits are (see CREC035000). They form part of the expenditure credit total which is redeemed by the company for each accounting period (see CREC070100).

Commencement

Additional credit is available on relevant VFX expenditure incurred on or after 1 January 2025. Expenditure incurred before this date is relieved at the usual 34% rate of AVEC.

Claims to additional credit can be made from 1 April 2025.

Animations and children’s TV programmes

Animated films and TV programmes may still receive additional credit if production companies do not claim Chapter 3 credits on the basis that they are animations and instead claim on them as regular films or high-end TV programmes.

Children’s TV programmes may qualify for the additional credit in the exceptional circumstance that they meet the qualifying criteria for high-end TV programmes and production companies choose to claim on them as high-end TV programmes, rather than as children’s TV programmes.

A company which is producing an animated film, animated TV programme or children’s TV programme should consider whether it is more beneficial to claim a production as:

• an animation or children’s programme, or
• as a non-animated production or high-end TV programme that has qualifying VFX expenditure.

For animations and children’s TV programmes, all relevant global expenditure has a 39% credit rate but is subject to the 80% cap.

For non-animated productions and high-end TV programmes with relevant VFX expenditure, relevant VFX expenditure has a 39% credit rate and is exempt from the 80% cap, while all other relevant global expenditure is subject to the 80% cap and has a credit rate of 34%.

Which option is more beneficial will depend on how much of relevant global expenditure is relevant VFX expenditure and how much is UK expenditure.

Independent films

A company cannot claim additional credit for VFX costs on an independent film (also known as certified low-budget films). Independent films receive Chapter 3 credit at a rate of 53% (CREC021110). This means that in most cases, unless VFX spend on the film is unusually high, it will be more beneficial to claim as an independent film than as a regular film with additional VFX credit.