On 5 June, SXSW London hosted a panel titled “Taking the Taxing Out of Tax: Let's Talk About Incentives”, which was moderated by Manori Ravindran, senior contributing editor at Screen Daily. Gareth Kirkman, UK business and industry development manager for the British Film Commission, and Nicky Bentham, producer and co-chair at Neon Films, were the speakers. The panel revolved around recent changes to the UK’s schemes and transitions surrounding AVEC, the Audiovisual Expenditure Credit.

Kirkman explained that he and his colleagues, including those at the UK Screen Alliance, have spent decades advocating for a change in how VFX is treated in the UK. Under the previous tax-credit system, the 25.5% relief could only be claimed on up to 80% of the total core expenditure, limiting the incentive for spending entirely within the UK. “It was an EU state-aid rule that lasted for a while; it was basically an anti-competitive thing. It wasn't financially lucrative to spend every single penny in the UK. It was seen as a fairness measure. They'd already incentivised it enough, and any more would have been unnecessary. But the unintended, I hope, consequence of that was that highly portable elements such as visual effects, typically done in the later stages of production, were often outsourced to other countries,” the manager said.

In his view, that was the principal market failure: the UK was losing valuable VFX work along with the chance to develop local infrastructure and talent. Although the UK successfully attracted physical production, much of it supported by US and international investment, budgets would often hit the cap, and the remaining spend – particularly for post-production like VFX – would go elsewhere, such as Canada. The recent change resolved this by removing the 80% expenditure cap specifically for VFX and introducing a small uplift, effectively increasing the relief rate to 29.25%.

Another element under discussion was the Enhanced AVEC, informally called the IFTC, or Independent Film Tax Credit. Bentham herself was involved in the changes, through her role at PACT, a trade body that looks after producers in the UK, where she is the co-chair of the film producer group. She confessed that a “market failure” in the way UK independent films have traditionally been financed had been known about for a long time before any changes were actually made. The producer then went on to explain how the system works: “There's no minimum budget or minimum spend, but it's up to £15 million that you can apply the incentive to. The budgets can actually be slightly more than that, and you need to have a British writer or director, either resident or national, or it needs to be an official co-production in order for it to qualify as a British independent film.”

Kirkman explained, “This is all still very new. Although the policy was officially ratified during the London Film Festival last October, it's only been possible to start claiming under the IFTC since April. So, in that sense, it’s brand-new. As for the VFX uplift, we have been able to claim that expansion since January, and it only became active in April. Still, the interest and demand for it have definitely been there.”

Later on in the panel, Bentham discussed the importance of the value of the UK as a country in order to attract shoots, which makes it easy to overcome the hurdles of these new rules: "We're lucky in the UK to have a well-established and reliable tax-incentive system. With a good accountant and if you follow the rules, the process is usually straightforward.”

Both agreed that, compared to other countries, the UK stands out for its stability and straightforward tax-incentive system, making it an attractive option for productions. “Italy, for example, offers a 40% rebate, but the process is incredibly complex and often difficult to align with UK production structures,” noted Bentham. Kirkman added that one of the UK’s key advantages is the absence of a sunset clause in its incentive scheme. Hungary was mentioned as an interesting nation for productions of late, but he noted that, for those in early development, uncertainties in the legislation can pose serious risks if the policy changes unexpectedly, and this can happen in countries that are only just starting to be involved in the film industry at a high level. “The UK, on the other hand, is seen as a stable, reliable option that’s been in place for a long time and enjoys cross-party political support,” he concluded.

Finally, when asked about the potential impact of Donald Trump’s tariffs on their country, the pair acknowledged that there’s little to comment on for now, as the entire proposal remains speculative.