Museum VAT deal ‘on hold’

The comments come after press reports that Customs was about to agree to allowing museums that do not charge a fee to reclaim their VAT.

The money involved runs into millions with an estimated #5m at stake nationally including around £1m a year each for the British Museum and National Gallery.

Customs has moved quickly to indicate that there are still many details to iron out with its main concern focusing on an effort to ensure any concessions it offers museums will not set a precedent for other sectors.

‘We don’t want to be in a position where we set precedents. This is not an easy problem at all but we would like to find a solution,’ said a spokesman.

Museums, through the National Art Collections Fund, have been campaigning since 1997 for changes to allow museums that do not charge an entry fee to reclaim their VAT.

Museums that do not charge are not considered as engaged in a business transaction and are not allowed to claim back VAT.

The strategy for the last 18 months has been to campaign for a change to section 33 of the VAT Act which lists a number of bodies, including the BBC, ITN News and local authorities; which are permitted to reclaim VAT even though they fall into the ‘non business’ category.

Museums are now arguing they should be on the exempt list. This follows earlier plans to have non-charging museums introduce a £1 nominal entry fee to adult visitors that Customs would accept as a ‘bona fide’ fee.

However, Customs insisted that such a measure would have to be reviewed after six months and then insisted it would only apply where adult visitors would be in the majority. It was an immediate problem for museums like the Victoria and Albert where student numbers are extremely high.

A key strategy of the museums’ campaign is to make the government look as if it is delivering on government promises before the next election.

A statement from the National Gallery said: ‘We would be delighted if VAT rules were to be changed so that free museums no longer needed to pay the tax. This would clearly be a major encouragement to all museums to offer free admission.’

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