DRAFT Value Added Tax (Refund of Tax to Museums and Galleries) (Amendment) Order 2024
Published 25 March 2024
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Who is likely to be affected
Those museums and galleries added to the list of bodies entitled to benefit from the value added tax (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.
Background to the measure
Under the normal rules, 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 Value Added Tax Act 1994 (the VAT Act). 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 24 bodies and relevant museums 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 SI will come into effect from [date to be confirmed post consultation].
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.
The SI is to be laid [date to be confirmed post consultation] and come into force [date to be confirmed post consultation].
Summary of impacts
Exchequer impact (£m)
| 2023 to 2024 | 2024 to 2025 | 2025 to 2026 | 2026 to 2027 | 2027 to 2028 | 2028 to 2029 |
|---|---|---|---|---|---|
| Negligible | Negligible | Negligible | Negligible | Negligible | Negligible |
This measure is expected to have a negligible impact on the Exchequer. The measure supports the Exchequer in its commitment to free public admission to the main museums and galleries and to ensure that the list of bodies entitled to benefit from the VAT refund scheme is kept up to date.
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
This measure will have a positive impact on the 24 businesses and civil society organisations newly named on the VAT Order as they will be able to reclaim VAT paid on purchases made to support free admission to a museum or gallery. One-off administrative costs will be negligible, and include such things as familiarisation with the changes.
Continuing costs for these businesses will include the adoption of a VAT account for recovery of VAT, such as recording more information of the VAT they have incurred. They will also be required to provide visitor numbers biannually in order to remain on the Order.
This measure is expected overall to 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.
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.
Operational impact (£m) (HMRC or other)
Our analysis has confirmed there are no operational and delivery impacts for HMRC as a result of this submission. 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 policy objective of this measure is that irrecoverable VAT under the normal rules should not become a disincentive to museums and galleries providing free admission to their permanent collections. Allowing the bodies named in this instrument to recover the VAT incurred in carrying out these activities will ensure this does not happen. The measure does not require further monitoring, beyond HMRC’s normal risk-based assurance of VAT repayment claims.
Further advice
If you have any questions about this change, please email s33avat.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.