MGETR90040 - Museums and Galleries Exhibition Tax Relief: avoidance; transactions not entered into for genuine commercial reasons

S1218ZCN Corporation Tax Act 2009

The extent to which Museums and Galleries Exhibition Tax Relief (MGETR) is available is dependent on the amount of core expenditure on an exhibition. The minimum amount of core expenditure that is UK expenditure must be 10%. (Prior to 1 April 2024, the minimum expenditure condition instead required at least 25% of core expenditure to be European expenditure. Please see MGETR50040 and MGETR50045 for details.)

Furthermore, because the rate at which surrenderable losses are exchanged for a Museums and Galleries Exhibition Tax Credit (MGETC) can be higher than the rate of Corporation Tax, it may be the case that UK expenditure is overstated artificially.

Where a transaction is attributable to arrangements entered into otherwise than for genuine commercial reasons and the purpose is to inflate the amount of the additional deduction and MGETC given to a MGEPC then that transaction is disregarded when computing the additional deduction for MGETR.

To prevent the size of the budget being artificially distorted, in determining the size of an exhibition’s core expenditure, the amount of expenditure on transactions entered into (directly or indirectly) between connected persons must be established by reference to what the arm's length value would have been had the parties been unconnected. If this is not done, the expenditure is excluded to the extent that it represents connected party profit. Please see MGETR70015 for more details.