Other VAT issues

VAT - VAT: the basics - Cultural exemption - Other VAT issues - VAT Q&A

Free entry

There are variations in the rules on VAT related to free admission to cultural institutions. Some museums and galleries are covered by the Section 33A VAT Refund Scheme, which was introduced alongside the government’s universal free access policy in 2001.

The scheme enables those institutions to recover VAT on purchases related to free admission despite it being a non-business activity. In all other cases, museums that offer free admission are not eligible to reclaim VAT on related expenditure, which leaves them at a disadvantage.

From March 2016, the criteria for eligibility to the scheme were broadened to include non-national or university museums. Applications can be made to include new bodies in the Section 33A scheme, or to add a new museum or gallery operated by a body already in the scheme. There are strict conditions for inclusion and it is not sufficient that a museum or gallery admits the public free of charge.

Requests should be submitted to the government department for culture in each devolved nation or to the Ministry of Defence where appropriate.

The completion of an application doesn’t guarantee admission to the scheme, and the decision on whether to include a museum or gallery in the scheme is ultimately made by ministers.

To be eligible to apply for admission to the scheme museums or galleries must:

  • be open to the general public for at least 30 hours per week, without exception
  • offer free entry, without prior appointment
  • hold collections in a purpose-built building
  • display details of free entry and opening hours on the museum website

Newly eligible museums will also be required to complete a strategic business case as part of the application process, including:

  • proof of Accredited status
  • past and/or projected visitor figures
  • information on existing and planned education programmes and community engagement work

Upon admission to the scheme museums will be required to provide:

  • evidence confirming an obligation to providing or continuing to provide free entry
  • visitor figures on a bi-annual basis

For more information on the VAT refund scheme, click here

Trust status

Many local authority museums across the UK may be considering a move to independent trust status. Becoming a trust has complex implications for VAT and requires careful attention and expert advice. Some implications include:

  • The museum may no longer be eligible for the cultural exemption on admission charges. This situation would occur if, for example, the board includes trustees that receive any form of renumeration or have any financial interest in the trust
  • Museum trusts can make greater VAT efficiencies - for example, a trust and its trading subsidiary can be registered for VAT as a group. The advantages of registering as a group are that you don’t need to account for VAT on goods and services supplied between group members and you only need to complete and submit one VAT return for the whole group
  • A number of museum trusts treat some or all of their council funding as a fee for the provision of services, which is a taxable supply and enables them to recover the relevant input VAT. These activities might include a payment for curatorial services, or making the museum’s collections accessible, or providing free admission to local schools. The proportion of the grant that is treated as a taxable fee does not need to represent the full cost of those activities, but it does need to be sufficient to stand the test of being a business activity
  • Charitable trusts pay a reduced rate of VAT at 5% on fuel and power.
  • Trusts are eligible for zero rates of VAT on purchases of all advertising, including recruitment advertisements and other publicity
  • Trusts are eligible for zero rates of VAT on adaptations to allow disabled access to buildings

More information on the tax implications of moving to trust can be found at the following links:

General links and resources

  • The HMRC charities helpline offers free advice on VAT reliefs for charities - call 0300 123 1073 or fill out an enquiry form
  • Charity Tax Group: www.ctrg.org.uk/home

This page was updated in May 2018.