Tax Relief for Museums and Galleries

The new Chancellor’s Autumn Statement had some welcome news for museums and galleries, although as is so often the case with the initial headline statements it is never quite as straightforward as the first sound bites might suggest once you dig down into the ‘small print’!

In the 2016 Budget VAT relief was announced for qualifying expenditure on touring exhibitions (to apply from 1 April 2017), but not in relation to the creation of permanent exhibitions. However, Philip Hammond has announced the extension of that relief to include permanent exhibitions.

The qualifying expenditure will be capped at £500,000 per exhibition and the rate of relief applied will be 20% for non-touring, i.e. permanent exhibitions, and 25% for touring exhibitions.

So, on the face of it, that sounds like good news and has certainly been welcomed by the Museums and Galleries sector.

Whether or not the news is good for your museum will depend on a range of factors, not least the size and nature of your enterprise and whether you are registered for VAT in the first place.

Where museums charge for admission that income may well be exempt from VAT under the cultural exemption provisions and so only gift shop and catering income will be deemed as taxable. If that taxable income falls below the current registration threshold of £83,000, and the Museum has not opted to register for VAT voluntarily, then VAT will not be an issue. If, however, taxable income exceeds the registration threshold and the Museum is registered then the new relief will surely be good news, assuming of course that new galleries are planned.

An added complication in the complex world of VAT relates to the organisational structure and nature of the subject enterprise. Whether it operates a trading subsidiary and covenants profits up to a charity, the extent to which the venture is a charity in its own right and compliance with all the various cultural exemption criteria and other factors will all impact on a Museum’s ability to benefit from these latest relief provisions. Accordingly it can be misleading to generalise and our advice would always be to seek advice as it applies to your Museum and ask for a helping hand from those, like us, who can lead you through the VAT labyrinth.