Film Accounting Glossary
Expenditure credit
What is an expenditure credit?
Also called AVEC, or audio-visual expenditure credit.
An expenditure credit is an incentive structured as a taxable credit calculated on qualifying production spend, paid directly to the production company rather than sold to a third party.
The UK's Audio-Visual Expenditure Credit is the best-known example, replacing the older film tax relief system. Because it is claimed through the corporate tax return of a qualifying production company, it requires a properly constituted local entity and audited qualifying spend.
Example
A UK production company claims the Audio-Visual Expenditure Credit through its corporation tax return on qualifying UK spend. It needs a properly constituted local company, audited spend, and a cultural test pass, so the entity structure has to exist before shooting starts.
Figures are illustrative, chosen to show the mechanics rather than to quote market rates.
Where you'll see it
Claimed through the local corporate tax return, not sold to a third party. Requires a qualifying production company in the jurisdiction.
Common mistake
Assuming it works like a US transferable credit. It is claimed through a local company's corporation tax return, so the entity has to exist and qualify before shooting.
Related questions
- How is an expenditure credit claimed?
- Through the corporation tax return of a qualifying local production company, supported by audited qualifying spend and, where required, a cultural test.
- Can an expenditure credit be sold to another taxpayer?
- No. Unlike a transferable US credit it is claimed by the production company itself, which is why the local entity structure matters so much.