The Producer's Guide to AVEC and the VFX Uplift: UK Film Incentives in 2026

Since shifting from the traditional Film Tax Relief (FTR) system to the Audio-Visual Expenditure Credit (AVEC), HMRC has begun the first phase of “future-proofing” the UK with a stable framework for a wide variety of productions.

The second phase of this incentive system was introduced in March 2025, when final guidance was published relating to the VFX spend in the UK.

Effective 1 April 2025, HMRC announced an additional 3.75% uplift on top of the 25.5% AVEC for VFX spend, resulting in a total 29.25% net, making it one of the most competitive UK visual effects tax incentives globally.

For years, the UK has grown its VFX industry into a robust hub of over 12,000 specialists, primarily concentrated in London. The talent pool includes senior artists, a steady stream of skilled graduates, and leading studios such as DNEG and Framestore, alongside boutique houses like BlueBolt and Milk VFX. 

Thanks to AVEC and the enhanced VFX portion of the incentive program, the already booming VFX industry is well positioned for a stable work pipeline and upward model of growth. To help producers understand a more detailed framework of the VFX uplift and the qualifying factors involved, I’ve created this guide to help you navigate the complexities and determine if the UK is the best fit for your project. 

What is the UK’s Audio-Visual Expenditure Credit (AVEC), and how does it work?

The Audio Visual Expenditure Credit, also known as AVEC, launched on 1 January 2024 with the goal of creating a more sustainable infrastructure to attract productions to the UK, and keep them there.

AVEC offers a 25.5% payable credit with an 80% cap on qualifying UK expenditure for film and high-end TV (HETV). The credit is payable as a cash rebate, making it a widely used financing tool that can be leveraged with lenders during production.

While the UK film tax credit framework offers strong financial incentives, it also requires increased tracking and careful planning.

To qualify, projects must:

• Incur at least 10% of total core spend in the UK
• Pass the UK Cultural Test or qualify as an official co-production
• Be intended for:
  • Theatrical release (film)
  • Broadcast (television)
• Be produced by a UK production company that is:
  • Registered in the UK
  • Responsible for all stages of production (although, not all stages need to be completed in the UK), including pre-production, principal photography, post-production, and delivery
• Submit claims through the UK corporation tax system, including the Additional Information Form (AIF)

In addition, there are other qualifying and non-qualifying criteria that projects must be evaluated for before they are approved. For a more comprehensive review, see my recent article AVEC Explained: A Complete Guide for Producers.  

The VFX uplift: How the additional 3.75% credit works and what changed in 2025

Since AVEC was first introduced, discussions continued around how best to structure the VFX component, which led to the additional uplift.

To increase global competitiveness and attract high-value post-production work back to the UK, HMRC determined that VFX expenditure would be excluded from the 80% qualifying spend cap. This creates a dual benefit for VFX-heavy productions.

Previously, VFX spend counted towards the 80% cap, reducing available headroom for other UK costs. Now, VFX spend benefits from both an enhanced rate and enhanced treatment under the AVEC regime.

From 1 April 2025, VFX spend for film and HETV:

• Qualifies for a 4% uplift
• Delivers an 29.25% net benefit 
• Is exempt from the 80% cap, meaning 100% of UK VFX expenditure will qualify

Animations, children’s TV, and Enhanced AVEC productions (also known as IFTC) will not qualify for the uplift as they already receive the increased rate (or higher) on all eligible costs.

To help you better understand how this refund works, let’s use a £100M production as an example to show you pre-uplift and post-uplift changes, and how they both impact the overall budget:

Before these changes, big productions often chose to move elements, commonly VFX, overseas to prevent them from potentially losing incentive value based on the 80% cap. Now productions can structure their projects in a way that keeps it all within the UK without having to choose other locations (unless it feels strategic), optimising overall incentive value. 

Timing your claim: When you get the base AVEC credit, and when the VFX uplift is paid

The UK is a strong production location choice with multiple benefits, especially VFX-heavy projects, but it does come with careful financial planning.

When submitting for the VFX uplift, be aware that the rebate comes in two stages:

1. During production (interim claims)

• You can claim money back while the project is ongoing
• HMRC only pays you 25.5% 
• The extra VFX uplift is not included yet

2. After the project is finished (final certification)

• Submit your final claim
• Recalculate the available incentive with any extra VFX uplift up to 29.25% net
• This is when you receive the remaining uplift amount

In practice, this timing structure has limited impact, as interim claims are typically submitted at the end of principal photography when qualifying VFX spend to date is minimal.

What counts as 'qualifying VFX spend' under AVEC

HMRC defines VFX as “work consisting of the use of computer technology to create or alter images for inclusion in a film or TV programme.”

According to HMRC, VFX can include:

1. Concept design (provided it does not belong to the development phase)
2. Storyboarding to plan VFX work/shots
3. Compositing
4. Colour correction
5. Character and creature animation
6. Digital matte painting
7. Motion capture
8. Rotoscoping
9. Producing images for virtual sets
10. Lighting and rendering

HMRC also clarified that generative AI costs are eligible as part of VFX spend, aligning the incentive with modern production pipelines.

Know your AVEC VFX uplift eligibility

Even if you have a VFX-heavy project, producers must ensure that their project is eligible to receive the enhanced rebate:

Cultural Test: Projects must pass a UK Cultural Test to determine whether it is “culturally British” in the content seen on screen, who worked on the project, and where the project was done.

Compliance and Reporting: There are additional accounting and reporting requirements to separate VFX expenses from the other expenses to support claims. All productions must fill out an Additional Information Form (AIF) to submit to HMRC alongside their claim. 

If, you’re claiming VFX uplift as part of your overall incentive claim, you must including the following for all the VFX providers whose cost you are claiming upon:

• Vendor company number and name 
• VFX costs incurred with the vendor 
• Number of people engaged in VFX work at the vendor (within ranges given by the form) 
• A description of the VFX services provided 

Four common incentive mistakes, and how to avoid them

With all the nuances that go into securing the VFX uplift (or any UK incentive), it’s easy to overlook certain steps. Here’s what to be aware of BEFORE getting started to set your project up for success: 

1. Incorporating too late

It’s imperative that you begin thinking about UK incentives before key decisions like vendors are chosen, crew hired, and budgets locked in. Incentives need to be part of early budgeting and vendor selection, not an afterthought because of the overall requirements of the UK incentive. 

Remember – the VFX element is an uplift, not a separate scheme. All standard rules apply including being responsible for pre-production.

The pitfalls:

You have no UK company set up and begin production. You are therefore automatically excluded from any UK incentive, including the VFX uplift. You would miss the chance to:

• Route VFX through UK vendors and receive the 3.75% VFX uplift incentive
• Structure the project to maximize the cap and uplift
• Claim any UK incentives

Example: A U.S. producer hires a Canadian VFX house early. Later, they realize UK incentives offer a better return, but it’s too late to access them. Since a UK company was not established from the beginning, and responsible for all aspects of production, that producer is unable to retrofit a UK incentive structure, and misses out on receiving any incentives in the UK. 

2. Misunderstanding “used or consumed in the UK”

For costs to qualify, the work must actually be performed in the UK. It’s not about who you hire, but where the work happens.

The pitfalls:

• A UK vendor subcontracts work overseas
• Work is partially done outside the UK

Example: You hire a London VFX company, but they outsource half the work to another country. That portion does not qualify.

3. Cultural test and final certification

To receive the incentive, your project must pass the UK’s cultural test and receive final certification. You must have a final certificate to make your final claim where the VFX uplift is payable.

The pitfalls:

• Missing documentation
• Delays in submitting paperwork
• Not fully meeting criteria for qualification for your production

Example: Your project qualifies, but paperwork is incomplete, leading to a delay in obtaining certification, and therefore a delayed rebate payment. Should you no longer qualify, a rebate will not be payable. 

4. Vendor contracts and defensible cost splits

To claim the VFX uplift, productions must provide detailed vendor-level reporting through the Additional Information Form (AIF), including:

• Vendor name and company number
• Total VFX spend per vendor
• Number of personnel involved (within ranges)
• Description of services provided

If vendor costs aren’t clearly defined and documented, it can limit how much of the VFX uplift you can actually claim. The VFX uplift only applies to a specific subset of costs called “relevant VFX expenditure” and if not tracked clearly, you can’t claim it fully.  

The pitfalls: 

• Vendor contracts and invoices are too vague (e.g. listed as “post-production services”)
• VFX work isn’t clearly separated from other services
• Costs aren’t tracked separately

Example #1: A vendor bundles editing, finishing, and VFX into a single line item. Production can’t clearly identify qualifying VFX costs, reducing their final claim. 

Example #2: You spend $20M on post, but only $12M is clearly identified as VFX. You can only claim an uplift on $12M.

How Entertainment Partners helps productions navigate AVEC and the VFX uplift

With the new VFX uplift, the UK is now more than ever a financial, strategic, and creative hub for VFX-driven projects. Yet, with a more complex incentive structure, it brings more complexity. 

Submitting for AVEC and the additional VFX uplift credit may appear daunting at first, but Entertainment Partners is here to be your production partner throughout the process. 

Our expert team at Entertainment Partners is ready to support your production from prep through wrap and beyond, ensuring you navigate the UK incentive complexities with ease and confidence. Connect with us today.

This article contains general information we are providing on a subject that may be of interest to you. Nothing in this article should be considered tax, accounting, or legal advice. You should consult with your own tax, accounting, or legal advisors regarding the applicability of this information to your specific circumstances.