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HMRC internal manual

VAT Business/Non-Business Manual

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Specific issues: VAT treatment of museums and galleries

For detailed information on the tax treatment of museums and galleries please see Notice 998

Admission charges

Some museums make a general admission charge for the public to enter their premises and view their collection. This is a “deemed” business activity under VAT Act 1994 section 94. Tax that relates to this will be input tax, for example tax on display design and display maintenance.

In general, admission to premises or events for a charge is a standard rated supply. VAT is due on the whole charge, not the balance after any expenses have been deducted. ‘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 an admission to 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 seat, the whole charge is still standard rated.

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 a standard rated admission charge if the person has to pay, or is made to think they have to pay, to get in.

Museums 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 tax.

Conversely non-charging museums may have a lot of business activities and be entitled to a reasonably high recovery of tax..

VAT Act 1994 Section 33A provides that refunds can be given to specified museums and galleries. This applies where goods and services purchased by these bodies relate to them 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)