Today the government has laid regulations to bring in the Independent Film Tax Credit (IFTC). This will provide an uplift to our existing Audio-Visual Expenditure Credit (AVEC) specifically targeted to support the growth and success of low-budget British films. These regulations set out the eligibility criteria for film production companies, who will be able to apply for an eligibility certificate from the British Film Institute from 30 October this year. Companies will be able to apply to HMRC to claim the IFTC from 1 April 2025.

These regulations create the mechanism for low-budget film productions and international film co-productions to apply for tax relief in the form of an enhanced AVEC. This targeted uplift will be at a higher rate of 53% compared to the normal rate of 34% for other films.

The regulations include a Budget Condition to ensure that this tax relief specifically targets independent productions with a budget of up to £15 million.

To avoid productions with budgets slightly over £15 million receiving a much lower amount of relief, films with core budgets of up to £23.5 million are eligible. The IFTC has a cap of £6.36 million on the total cash credit receivable, which is based on qualifying core expenditure (i.e. ‘core budget’) of £15 million. This creates a taper in the proportionate value of the credit for films with core budgets above £15 million.

The enhanced AVEC rate will be available for £15 million of a production’s budget. There is also a “Modified Creative Connection” condition which means that the film must have a director or scriptwriter who is a British Citizen or ordinarily resident in the UK, or be an official UK co-production. Finally the regulations also detail the particulars and evidence that applicants will need to provide in order to access this enhanced relief.

The regulations have been laid alongside Appointed Day regulations which mean that from 30 October 2024, eligible companies will be able to apply for certification for this enhanced uplift. Film production companies can claim this enhanced relief in relation to films whose principal photography began on or after 1 April 2024. HMRC will begin accepting applications on 1 April 2025.

Both the Corporation Tax (Certification as Low-Budget Film) Regulations 2024 and the Finance (No. 2) Act 2024 (Applications for Certification as Low-Budget Film: Appointed Day) Regulations 2024 have been published on legislation.gov.uk.

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