VBNB44400 - Specific issues: VAT treatment of museums and galleries
Admission charges
Apportionment
Exempt activities
Case law
For detailed information on the tax treatment of museums and galleries please see Notice 998
Admission charges
Admission to premises or events for a charge is a business activity provided the activity satisfies the 2 stage-test in determining if an activity is business or not. ‘Premises’ means any enclosed area whether indoors or outdoors. Examples of premises include:
•museums;
•galleries;
•historic houses;
•ancient monuments;
•parks;
•gardens;
•zoos.
The definition of ‘admission’ includes any payment that gives an individual or a group the right to attend an event or a series of events such as a season ticket. Even if the charges cover the provision of other facilities, for instance the hire of a chair, the whole charge is considered payment made in relation to the business activity.
Please note that this is not the case where there is no admission charge and the public are asked for a donation instead. This money is outside the scope of VAT.
However, to qualify as a donation the payment must be:
- entirely voluntary;
- secure nothing in return for the donor; and
- the actual amount to be given must be entirely at the donor’s discretion.
It must also be clear to the donor that admission can be gained whether a payment is made or not. It is not a true donation but an admission charge, if the person must pay to get in.
Museums and galleries that charge for admission are likely to have a higher business element to their business/non-business apportionment than non-charging institutions. However, if they have non-business activities, they may still need to restrict some of the VAT.
Conversely non-charging museums and galleries may have a lot of other business activities, for example, gift shops and cafés that may entitled them to recover a higher amount of VAT.
Section 33A of VAT Act 1994 provides that refunds can be given to specified museums and galleries. This applies where goods and services purchased by these bodies are used by them in giving free rights of admission.
Apportionment
Tax that relates to both business and non-business activities, for example tax on general building overheads, needs to be apportioned under VAT Act 1994 section 24(5).
There is no set method of apportionment. Any organisation that has non-business activities should put forward a method that gives a fair and reasonable result.
HMRC will normally consider:
- the scale of the business and non-business activities; and
- the amount of tax that is likely to be incurred on them
when judging if an apportionment gives a fair result.
For example, HMRC is unlikely to accept that the use of a non-charging museum building for corporate entertainment will allow a sizeable increase in the business percentage unless it can be shown to be a major activity bringing in substantial revenue. The same principle applies to retail and catering outlets.
When considering museum apportionments the activities being considered should be part of the same legal entity or VAT group. Frequently commercial activities are operated by another entity such as a friends’ organisation.
Exempt activities
It is possible for a museum to have some exempt activities, for example activities involving land or certain educational activities. If it does a Partial Exemption calculation should be made after the business/non-business apportionment. See PE Partial Exemptionfor more about this.
Case law
Please see the following cases for more information on when tax can be reclaimed by museums, galleries and similar organisations.
Whitechapel Art Gallery (VBNB74400)
Imperial War Museum (VBNB74400)