The rules for the VAT refund scheme for museums and galleries are contained within Section 33A of the VAT Act 1994 and is drafted to ensure that qualifying bodies providing free admission are not adversely affected for VAT purposes.
How does the scheme work?
The VAT refund scheme rules provide a way for eligible museums and galleries to claim refunds of the VAT incurred on goods and services purchased in order to provide free access to collections. Ordinarily, it would not be possible to recover the VAT incurred on goods and services purchased to support non-business activities. However, under this scheme the government reimburses this otherwise irrecoverable VAT.
Museums and Galleries Offering Free Admission
Museums and galleries offering free access are not regarded as being engaged in any business in relation to this activity. They may, of course, have other activities that in their own right are business activities, for example, catering, sales of books and gifts and exhibitions for which there is a charge.
Ordinarily, it is not possible to recover the VAT incurred on goods and services purchased to support non-business activities. Thus VAT incurred in connection with the free admission of the public is not normally recoverable.
In certain circumstances, however, the government will reimburse this otherwise irrecoverable VAT. For this to be the case, the provisions of section 33A of the VAT Act 1994 (enacted on 1 April 2001) must apply, and the museum or gallery must be named in an order made by HM Treasury.
The museums and galleries are also entitled to offer other activities that in their own right are business activities, for example, catering, sales of books and gifts and exhibitions for which there is a charge.
The list of museums and galleries eligible for refunds of VAT has been updated. The updated list can be found in HMRC’s VAT Notice 998 entitled VAT Refund Scheme for national museums and galleries.