Policy paper

VAT (Refund of Tax to Museums and Galleries) (Amendment) Order 2024

Published 30 May 2024

Who is likely to be affected

Those museums and galleries added to, or removed from, the list of bodies entitled to benefit from the VAT refund scheme as per the Value Added Tax (Refund of Tax to Museums and Galleries) Order 2001 (as amended).  

General description of the measure

This statutory instrument (SI) adds further museums and galleries that allow free public admission to the VAT refund scheme and removes those which are no longer eligible. It also updates the details of other bodies and their relevant museums and galleries where the name and address has changed since the last update. 

Policy objective

The Government is committed to free public admission to the main museums and galleries, and the VAT refund scheme supports this policy by enabling VAT refunds of certain purchases related to the provision of free admission to the specified relevant museums and galleries. This reflects the Government’s continuing support of the UK’s world-leading museum sector.

Background to the measure

Under current legislation, a business can only reclaim VAT on the goods and services it purchases, which are used to make an onward taxable supply. A museum or gallery that does not charge for entry is not making taxable supplies and therefore is not able to recover the VAT it incurs. 

The refund scheme is set out in Section 33A of the VAT Act 1994. It was introduced to ensure that what would otherwise be irrecoverable VAT does not deter a body from allowing free admission. It refunds VAT paid on purchases made to support free admission to a museum or gallery. The list of qualifying bodies is set out in the Schedule to the Value Added Tax (Refund of Tax to Museums and Galleries) Order 2001 SI 2001/2879 (as amended from time to time by other amending SIs), and the Treasury has the power to add bodies to the list or remove them from it.

The 19 bodies (with their corresponding relevant museums or galleries) to be added through this SI meet the conditions to be included in the scheme. Those that are being removed have confirmed that they no longer meet the conditions to be included in the scheme and have requested their removal. 

Detailed proposal

Operative date

It is intended that this statutory instrument will come into effect from 8 July 2024. 

Current law

Section 33A of the VAT Act 1994 allows refunds of VAT paid by museums and galleries on purchases made in connection with the provision of free admission to the public. Under Section 33A(9), the Treasury may by order specify the bodies to which refunds are made, and the date from which claims can be made.  

The Value Added Tax (Refund of Tax to Museums and Galleries) Order 2001 (SI 2001/2879) was the first order made by the Treasury to admit bodies to this refund scheme. It has a single list of bodies in the schedule to the order. Subsequent amendments are made to the schedule by amending instruments from time to time. 

Proposed revisions

The Schedule to the Value Added Tax (Refund of Tax to Museums and Galleries) Order 2001 (SI 2001/2879) will be amended to reflect the additions and changes referred to above.

Summary of impacts

Exchequer impact (£ million)

2023 to 2024	2024 to 2025	2025 to 2026	2026 to 2027	2027 to 2028	2028 to 2029
empty	empty	empty	empty	empty	empty

The final costing will be subject to scrutiny by the Office for Budget Responsibility (OBR), and will be set out at the next fiscal event.

Economic impact

This measure is not expected to have any significant macroeconomic impacts. 

Impact on individuals, households and families

The measure is not expected to impact on individuals, households and families as this measure makes provisions for specified museums and galleries to recover VAT costs relating to the provision of free admission.  

Equalities impacts

It is not anticipated that there will be impacts on those in groups sharing protected characteristics by this measure.  

Impact on business including civil society organisations

Overall administrative impact on the 19 businesses and civil society organisations newly named on the VAT order (and their corresponding relevant museums or galleries) will be negligible, and include such things as one-off administrative costs and familiarisation with the changes. 

Continuing costs for these businesses will include the operation of a VAT account for recovery of VAT, for example recording more information of the VAT they have incurred. There are also administrative steps to be taken in the form of submitting VAT refund requests on the costs related to the provision of free entry where they are not VAT registered and have not done so before. These however should be minimal and in keeping with usual processes already being completed by the bodies.

They will also be required to provide visitor numbers biannually in order to remain on the order. 

This measure is expected to have a positive effect and improve business experience of dealing with HMRC because bodies which are being admitted to the order and those that continue to benefit can recover VAT relating to the costs of providing free admission.  

Operational impact (£ million) (HMRC or other)

There are no operational and delivery impacts for HMRC as a result of this measure. As an established process, all infrastructure is already in place to introduce changes as a result of the SI.

Other impacts

Other impacts have been considered and none have been identified. 

Monitoring and evaluation

The measure does not require further monitoring, beyond HM Revenue and Customs’ normal risk-based assurance of VAT repayment claims.  

Further advice

If you have any questions about this change, please email 33avat.museumsandgalleriesconsultation@hmrc.gov.uk.

Declaration

Nigel Huddleston MP, Financial Secretary to the Treasury has read this tax information and impact note and is satisfied that, given the available evidence, it represents a reasonable view of the likely costs, benefits and impacts of the measure.