VAT Q&A

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

Q. Museum A does not charge an admission fee but instead invites visitors to make a donation. The donation is not compulsory. What is the VAT status of the donation?

A. Non-business (outside the scope of VAT).

Q. Museum B is a VAT-registered charity run by a board of unpaid trustees. Museum B charges admission fees to enter the museum. Should the museum charge VAT on the admission fee?

A. No – the admission fees are exempt from VAT under the cultural exemption (assuming all other eligibility criteria are met).

Q. Museum C produces a free quarterly magazine for its members. Local businesses, such as restaurants and hotels, pay to advertise in the magazine. Is the advertising a non-business or a business activity for VAT purposes?

A. Business activity – the museum is providing advertising services in return for a payment.

Q. Museum D is a VAT registered charity. It runs educational workshops for schools. The schools are charged £10 per student for the workshops. Should the museum charge VAT on the fees?

A. No – educational workshops are covered by the education VAT exemption (assuming eligibility criteria are met).

Q. Museum E has a membership scheme. Annual membership costs £35 and entitles the member to free admission to the museum for a year (normal admission prices are £5). Members do not receive any other benefits. What is the VAT status of the membership income?

A. Exempt – the membership covers admission fees which are covered by the cultural exemption (assuming all eligibility criteria are met).

Q. Museum F has the following annual income:

Admissions Income: £500,000
Donations: £300,000
Gift Shop: £85,000
Café: £100,000

Total: £985,000

1. Should Museum F be registered for VAT?

2. Will Museum F be able to reclaim all of the VAT on its costs?

A. 1. Yes, Museum F should be registered for VAT as taxable turnover (gift shop and café income) exceeds the registration threshold of £79,000.

2. No, the museum will not be able to reclaim all of the VAT on its costs. Admissions are exempt and donations are non-business, so it will only be able to reclaim VAT on costs attributable to the gift shop and café.



The information in this section was provided courtesy of charity specialist accountants Godfrey Wilson Limited, www.godfreywilson.co.uk


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