AVEC and the VFX Uplift Explained: Key Takeaways from EP's Master Series Panel
AVEC VFX Uplift at a Glance: Rate: 29.25% net. Effective date: April 1, 2025. Cap removed: Yes.
Since HMRC launched the second phase of the Audio-Visual Expenditure Credit (AVEC) in March 2025, the UK, a thriving hub for VFX, has become an even more attractive destination for producers looking to film and complete post-production in one place while supporting both their budgets and creative ambitions.
In our recent Master Series on Post-Production in the UK, moderator Joseph Chianese, SVP and Practice Leader of Incentives at Entertainment Partners was joined by Lloyd Gunton, Vice President of UK Incentives at Entertainment Partners, Neil Hatton, CEO of UK Screen Alliance, and Roopesh Parekh (Executive Producer, Stargate, Vision Quest, Willow) for a candid conversation about how to leverage the AVEC tax credit for VFX work.
Together, they explored the benefits and complexities of the recently introduced VFX uplift and what producers need to know to maximize the incentive, including:
- What the AVEC VFX enhancement is
- The benefits of removing the 80% cap on qualifying VFX spend, and what qualifies
- Financial planning examples and cash flow considerations
- Why producers need to plan early around SPVs, used vs. consumed rules, vendor selection, and production finance strategy
Joe kicked off the webinar by describing AVEC with the VFX uplift as “close to a perfect incentive program” citing it is all-inclusive, and easy to utilize, while noting that it also comes with added complexity:
There are more checks and balances, and a full audit upon completing a project, so producers will need to ensure that they are equipped to handle the extra planning and administrative work to maximize the incentive benefits.
At Entertainment Partners, we’re here to support you without the overwhelm. As you’ll learn in this webinar, our experts are ready to guide you through the UK incentive complexities with ease and confidence.
What is the AVEC VFX uplift, and why does it matter for producers?
The VFX enhancement expands the already strong AVEC program. Effective 1 April 2025, HMRC introduced an additional 3.75% uplift on qualifying VFX spend, increasing the net rate from 25.5% to 29.25%. Even more significantly, qualifying UK VFX spend is no longer subject to the 80% spend cap.
Now, productions can make more economical decisions without having to sacrifice creativity or logistical challenges. It came at a pivotal time because as Joe points out:
“Budgets are still tight, green light decisions are harder, and producers are being asked to make every dollar and every pound count.”
Roopesh Parekh adds to this financial benefit with the 80% cap removal:
“There is so much to gain from having physical production and visual effects running side by side with our incredible infrastructure and deep talent. Now, having everything under one roof enormously helps creatively, collaboratively, and logistically, and from a security standpoint.”
As the second-largest hub for visual effects in the world (and the largest in Europe), the UK continues to position itself as a leading destination for incentives from prep through post-production. But producers must plan to qualify and ensure their project is the right fit creatively and budget-wise for the uplift.
For a comprehensive breakdown of the incentive structure, check out our recent article UK Audio-visual Expenditure Credit (AVEC) Explained: A Complete Guide for Producers
What qualifies for the VFX uplift?
There are a variety of factors that go into qualifying your production to receive the VFX uplift.
Lloyd Gunton suggests you keep these main considerations in mind:
- Pass the cultural test
- Spend a minimum of 10% minimum in the UK
- Be structured appropriately as a UK company
While the VFX uplift applies to any VFX spend, Lloyd clarifies, “It isn't a VFX-only credit in that you can just bring VFX to the UK and qualify. You still must meet all the other parameters.”
In addition to the initial qualifying factors for a production, there are also guidelines for what VFX elements are eligible for the uplift. Lloyd assures producers,
“The phrase used by HMRC is the use of computer technology to create or alter images for inclusion in the program. It is a broad list of what generally qualifies, but it's not prescriptive, and can include touch-ups, matte painting, and creature work. It also means that some other parts of post-production do also qualify. The broad list allows for some interpretation and HMRC are always engaging on this, and willing to discuss it.”
The discussion around including AI in this list was “an important factor that HMRC emphasized” Lloyd mentions. Further explaining how “it helped to present-proof the value of this [incentive program] because can you imagine if you excluded AI tech? It would be almost impossible. VFX houses have been using things that are akin to AI in many ways, and computer programs to do things for them in fantastically clever ways for a number of years.”
Roopesh agreed with this point, saying, “The tax credit is so future facing because it's embracing the [AI] movement in technology that is very much here and very much being experimented upon.”
But qualifying for the uplift is only part of the equation. The panel emphasized that producers need to think strategically about company structure, vendors, and financing long before production begins.
Producer's Checklist: 5 steps to successfully plan for the AVEC VFX uplift
Even after your project qualifies, there are still other factors a producer must keep in mind early in the prep process if they are counting on incentives as part of their finance and production planning. The webinar panel discusses 5 main factors producers should consider before starting:
1. Set up an SPV before production begins
Setting up a UK company is first and foremost important. “We need 100% of the receipts and invoices to go through that company. We audit 100% to determine what is an 80% threshold and what is a 10% threshold. So, if you haven’t set up an SPV, it doesn't stop you from coming, but you're just not going to get the tax credit without it” Neil says.
2. Understand “Used and Consumed”
Vendor location is an important factor when qualifying. “Used and consumed” is the underlying concept behind the incentive, meaning if your spend is used or consumed in the UK, it qualifies.
To illustrate this concept in practical terms, Lloyd gives a helpful example. “We don't mind if you buy your wigs from Paris. That would qualify [as used] in the UK. As it relates to VFX, it is primarily about where the artists are doing the work. If your artists are in the UK, that spend would qualify. If your artists are in India or in Canada, that spend wouldn't qualify, even if the company raising that invoice was UK.”
Thankfully, the UK is outfitted with plenty of state-of-the-art VFX companies, from major firms to boutique companies, so hiring within the UK is fairly accessible.
3. Choose UK VFX Vendors Strategically
Vendor transparency and subcontracting matter more than ever when it comes to submitting for the cash rebate. Producers must weigh both the creative and logistical challenges in relation to the credit, and know what work will happen where.
Roopesh raises the point, asking the audience to consider “Incentives are great, but can the work actually be delivered and to the quality that you're after?”
Does your project have a lot of digital matte painting work that could be done by a boutique vendor? Whereas some of your more creature animation work might need to be done by somebody with a vast level of experience? It’s important to make early considerations about the creative components of your project and then weigh that with the delivery timeline of those assets.
Regardless of what vendors you hire, it’s important that the vendor is aware of how they need to break down costs and separate the qualifying VFX work from the rest of the post-production costs.
Lloyd elaborates, explaining the technical side of the incentive administration “we need to identify which [vendors] qualify for the enhanced rate. When we do the calculations and review, we're going to be writing directly to the VFX vendors and getting them to confirm what was done and where as well. So, we don't want any surprises.”
4. Plan production and finance together
While the VFX uplift is certainly appealing, the big question the panel posed is: Does it make sense for your project? It’s important to crunch numbers and strategically evaluate whether to keep both production and VFX in the same location.
Neil emphasizes the value of designing a preliminary plan, regardless of the size of your project and where you’re coming from:
“All budget ranges, in theory, qualify for this [UK incentive program]. You are not excluded by virtue of where you are initially based. But I think it's important that VFX is thought of as part of the complete picture. You have to look at it as part of the plan. Where am I going to shoot? Where am I going to do my VFX? How do the incentives work together?”
He further illustrates this point with an example:
“If you want to put all your VFX in the UK, and it doesn't quite come to 10%, you could still qualify…but other aspects of your UK spend can count toward that 10%. For instance, we’ve got world-class recording studios here. You could record your score at Abbey Road, and that would count toward your 10%, qualifying for the standard incentive, even if it doesn’t receive the VFX uplift. It really makes the UK a complete package, and I think it’s important to view it holistically.”
5. Built cash flow timing into your budget
If you are running a production on a lean budget, be sure to keep in mind the timing of when you’ll receive the cash rebate.
“Once you submit a claim in the UK, you can reasonably expect the money back in 2 to 3 months” Lloyd shares. “We had one paid out in 5 weeks recently, and that was a mid-high, six-figure claim. It wasn't a small amount of money, and it was paid out in less than 6 weeks by HMRC, which is fantastic…so if you compare that to a lot of jurisdictions, it's a phenomenal turnaround time.”
How Entertainment Partners helps productions maximize UK tax credits
There are many advantages to the UK’s AVEC incentive program, but having the right help matters. Incentive experts like the team at Entertainment Partners are vital to helping producers determine whether the UK is the right fit for their project, and what steps to take to maximize the benefits.
As Neil says, "You need to get specialist advice to make sure that you run the numbers correctly. Am I better in the enhanced AVEC, or am I better in the standard AVEC with the VFX uplift? It all depends on the quantity of VFX that you have, and what your overall budget is. Make sure you maximize the tax credit that you could possibly get."
Whether you’re producing an indie feature or a tentpole series, the UK’s evolving incentive landscape offers major opportunities for projects willing to plan strategically.
Watch the full webinar to learn more about the UK’s VFX uplift and if UK incentives are the right fit for your project. And reach out to our incentives team to learn more about how Entertainment Partners can support you in the UK!
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