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HMRC internal manual

VAT Government and Public Bodies

HM Revenue & Customs
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Other local authority activities: miscellaneous (F to M): library services

Under the Public Libraries and Museums Act 1964 a local authority, in its capacity as a library authority, must provide an efficient public library service for those who reside, work and study in its area. They are prohibited from charging for the loan or reading of books and other reading materials. They are, however able to charge for the loan of other items such as talking books, CDs, records, videos, DVDs, toys, artworks and prints.

Although there are businesses that hire some of these items, public libraries are not regarded as being in competition with them. For example, the hire period by a public library is often, by statute, a minimum period of one week and the prices charged are intended to partially cover costs, rather than being set in a commercial profit-making way. Therefore library loan charges income and that from any associated reservation charges, is non-business. However, this is an area that HMRC will keep under review should circumstances change.

Any charges that a public library makes for the late return of items, or because an item is damaged, are compensation and so are outside the scope of VAT.

Charges for other facilities, such as photocopying, internet access, or room hire, are all subject to VAT as they are by way of business. Similarly, if a public library sells any products such as books or stationery, or if it operates a café, the income generated is also subject to VAT.

If a library sells products such as prints for a local artist, or tickets for a local theatre, the position depends on whether the library is acting as an agent. Any commission it earns through acting as an agent, normally retained from the sale proceeds, will also be subject to VAT.