While animation companies are not eligible for the main research and development (R&D) tax relief, there are opportunities to claim back costs for innovative projects.
The Audio-Visual Expenditure Credit (AVEC) scheme is available to support animation companies and boost R&D work in the animation industry.
At randd uk, our expert R&D tax consultants have an expert knowledge and understanding of creative industry tax reliefs. We can help you identify whether your animation client is eligible for relief and support you to make a claim.
Which animation projects qualify for tax relief?
To be eligible for AVEC, an animation production project must meet several qualifying criteria:
- The programme is certified as British by the British Film Institute (BFI).
- The production must be intended for theatrical release, broadcast, or online streaming.
- At least 10 per cent of core production costs must relate to UK-based activities.
For a film or television programme to qualify as an animation project, at least 51 per cent of core production costs must have been spent on animation.
Certain categories of animation are not eligible for AVEC.
These include advertisement or promotional programmes, news and current affairs, and quiz, game, panel and variety shows.
randd uk’s expert R&D tax consultants can help you establish whether your client’s project qualifies for AVEC.
How to determine which animation costs are eligible for a claim
Before you can make a claim, you need to identify the qualifying AVEC expenditure.
Core production costs which qualify for tax relief and the AVEC scheme include:
- Pre-production
- Principal photography
- Post-production
- The delivery of the completed programme.
A company must be responsible for all of these costs in order to claim AVEC.
The company must also have been actively engaged in planning and decision-making for the production, as well as directly negotiated, contracted, and paid for rights, goods and services.
Our specialist R&D tax advisers can help you identify qualifying AVEC expenditure.
Claiming AVEC for your animation clients
Your client can make, amend or withdraw a claim for AVEC up to two years after the end of the period of account the claim relates to.
HMRC may agree to accept late claims in some circumstances.
Your animation clients can claim an expenditure credit based on a percentage of their qualifying costs.
Qualifying costs will be the lower of either:
- 80 per cent of total core costs.
- The amount of UK core costs.
You can claim 39 per cent of qualifying expenditure for animated films and TV programmes.
You will need detailed evidence to support your claim, including timesheets and expenses, payroll records, and a timeline of events relating to the project.
Claiming AVEC is a highly complex and specialised process, and many accountants lack the time or specialist knowledge needed to prepare accurate claims for their clients.
Our specialist R&D tax consultants will prepare a robust claim that has the best chance of enabling your client to claim back thousands of pounds in tax relief.
We will then deal with HMRC on your behalf throughout the entire processing stage, including defending the claim against any enquiries.
With our support, you’ll be able to help your client recoup vital costs that can be reinvested into the company for growth and innovation.
