Business rates review throws spotlight on tax reliefs for museums

Calls for exemptions given to museums to be protected
Nicola Sullivan
The government has been urged to protect tax reliefs for museums as it looks at how to reform business rates.

Ahead of last week’s budget, the Treasury launched a wide-ranging review of business rates, which are paid annually on 1.8 million non-domestic properties in England. The review, which is due to report back by Budget 2016, will explore how the system can be modernised so it better reflects changes in the value of property.

The Association of Independent Museums (AIM), which will be responding to the review’s call for evidence, wants to ensure exemptions given to museums operating as registered charities are not jeopardised as a result of the review.

Tamalie Newbery, the executive director of AIM, said: “Museums share many of the same concerns as the wider charity sector with regard to business rates and in particular the need to ensure that there are no negative unintended (or intended) consequences resulting from this wide-ranging review of rates.”
As it stands at the moment, museums are eligible for a mandatory relief for business rates levied on their premises as long as the property is wholly or mainly used for charitable purposes.
In some cases, museums will also be entitled to a discretionary rate relief of 20%, which is granted by the local authority. But there are concerns that some organisations with charitable status are being unfairly deprived of discretionary reliefs because of the introduction in 2013 of the Business Rate Retention Scheme, which incentivises local authorities to reduce the amount claimed through business rates.
Colin Hunter, the divisional director of Lambert Smith Hampton, a property management company, said: “Following changes in local government funding councils are having to fund a greater proportion of reliefs given to charities and are reviewing the amount of discretionary relief given.”

He added: “The reviews are resulting in fewer charities receiving discretionary relief.”

Hunter warned that if museums’ cafes and shops are seen as separate trading companies, they could incur higher tax penalties. This is because the Valuations Office may assess them as separate commercial entities.
AIM is also lobbying the government to lower the decapitilisation rate for museums so that it matches the rate enjoyed by educational institutions. The decapitilisation rate is used to calculate the notional rent on buildings that are rarely let. At the moment museums are subject to a rate of 5%, compared to the 3.3% applied to educational establishments.

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