Museums not charging for admission will be added to section 22 of the 1994 VAT Act, which enables non-business organisations to reclaim VAT. Currently museums charging visitors entrance fees can reclaim VAT because they are a business, but those free of charge must pay the tax.
National museums in Scotland, Wales and Northern Ireland are unaffected by the deal because they are funded by their own parliament and assemblies.
Labour wanted to abolish entry fees while in opposition, but dropped the idea in its manifesto for the 1997 election campaign. Customs and DCMS officials negotiated for six months to decide how to scrap charges.
As part of the ‘Quids In Scheme’, the DCMS has already agreed to subsidise national museums and from September most entry fees will drop to £1.
The chancellor said the secretary of state for culture, Chris Smith, would announce full details of the scheme in due course.
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