Budget announces extended VAT refund for museums
The Government has extended the VAT refund scheme for museums.This allows museums that allow the public free admission to recover VAT that relates to this free admission.
The rules used to allow museums to apply to be in the scheme if they were national museums (had national collections) or university museums. As the list expanded it was becoming rather difficult to work out what criteria was actually being applied when judging if a museum could qualify. Some clarification was needed.
What the Government has done is to widen the criteria so the refund can apply to all museums that provide at least 30 hours free public admission a week. This figure has presumably been chosen so the refund only applies to museums that open at more than weekends. Museums must be able to demonstrate that they advertise the free admission and it is available to the public on the door, rather than just by prior appointment. They must apply and have their application accepted.
Details of the new criteria can be found at : Museum Refund Criteria
The refund is a section 33 refund, although it is rather differently structured to that which applies to state schools and hospices. If VAT relates to costs that relate to both free admission and other activities then only the free admission costs are allowed under the scheme. The newer section 33 schemes, such as last years hospice scheme have an arguably wider scope since they allow VAT recovery of VAT incurred on all non business activity. It will be interesting to see if the existing scheme is revised to make it fit with the approach taken with the newer refund schemes.
Museum that are culturally exempt and make a small charge should consider whether by not charging they might recover more additional VAT than they lose from forgoing admission income.
Museums that make no charge and are eligible for the scheme will want to review their VAT recovery methodology. Like the hospices last year they will have moved from a position where they maximised their VAT recovery by adopting a VAT recovery apportionment that saw more of their activities as being business to one where the opposite is true.
But what is clearly exciting is that this is yet another budget where a VAT refund scheme has been introduced. This is a welcome direction of travel for the charity and third sector.
For my guide to museum and heritage VAT see :