UK Museums To Benefit From VAT Reforms

by Jason Gorringe, Tax-News.com, London

13 August 2001

The UK government has released the list of bodies which will benefit from a new VAT refund scheme, it revealed recently. In the United Kingdom, organisations whose activities are undertaken for no charge are not considered to be 'in business' for VAT purposes, and so cannot recover any VAT incurred pursuant to their activities. This leads many institutions such as museums and art galleries to charge for admissions so that they can recover the VAT which they incur.

However, from the end of this year, this all looks set to change as the government will be offering institutions VAT refunds when they allow the public free admission to their permanent collections, thus removing the incentive to charge. Last week the Financial Secretary to the Treasury, Paul Boateng, echoed the sentiments of the government's pre-election manifesto which stated that the Labour party was committed to reforming the VAT system. 'This much sought after VAT reform is central to making free entry a reality, and the undertakings received from the national museums and galleries concerned will deliver this no later than December 1st.'

Under the new scheme, which was announced in the March budget and legislated for in the subsequent Finance Bill, more than 24 different groups of museums and galleries, spread over 50 different sites will be eligible to benefit from the VAT refund, including the National Museums of Northern Ireland, Scotland and Wales, the V&A, the National Portrait Gallery, Tate Britain, and Tate Modern. The government announced that those institutions which do not currently charge for admission will be able to recover the VAT that they have incurred from April 1st 2001 onwards, and other eligible museums will recover the VAT incurred from the date that they move over to free admissions.

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