Budget 2016 announced that the Government would introduce a new tax relief for museums and galleries to support them to develop new exhibitions and to display their collections to a wider audience. The Government has now published a summary of responses document. CTG’s response to the consultation can be read here.
The tax relief will be available from 1 April 2017. As a next step, the Government will work with the sector to ensure museums and galleries are well-informed about the relief and are in a position to take advantage of it once it becomes available. Draft legislation has also been published today and is available for comment. It can be found at clause 22 of the draft Finance Bill.
The majority of respondents welcomed the introduction of a tax relief for museums and galleries. They told the Government that the relief would help support museums and galleries to continue developing and touring high quality exhibitions and said it would encourage museums to be more entrepreneurial and to think more about how best they could make use of their collections. However, the majority of respondents also said that the scope of the relief announced at Budget was too narrow, and suggested that it should be expanded to cover permanent exhibitions to make it accessible to a broader range of institutions.
Extension to permanent exhibitions
To ensure the relief is available to a wider range of institutions, the Government has removed the 12 month limit on qualifying exhibitions to ensure all new exhibitions (including permanent exhibitions) are within scope. To mitigate the risk of unaffordable additional costs the government will cap the amount of relief available at the equivalent of £500,000 of qualifying expenditure per exhibition.
Extension beyond museums and galleries
Following representations by CTG and others the Government has confirmed that it will ensure charitable libraries, archives, historic homes and similar organisations that put on qualifying exhibitions in outdoor spaces like sculpture parks are within scope, as long as they are run as charitable companies, wholly owned subsidiary companies of a charity which maintains a museum or gallery or wholly owned subsidiary companies of a local authority which maintains a museum or gallery. The Government will allow exhibitions that are not held in qualifying museums or galleries to qualify for relief, as long as they are put on by qualifying institutions
Corporation tax requirements
The Government has confirmed that although this relief is part of the corporation tax system, museums and galleries do not need to pay corporation tax to claim it; they just need to be within the charge to corporation tax. Charitable companies and wholly owned subsidiary companies of museums, galleries or local authorities are within the charge to corporation tax. Charities or their wholly owned subsidiaries may be able to surrender losses for a cash credit at a rate of 20% (or 25% if the exhibition is toured). Institutions not within the charge of corporation tax can choose to run an exhibition through a wholly owned trading subsidiary, through which they can also claim the credit. More information can be found here.
Evaluating the relief
The legislation will include a sunset clause which means that the relief will expire in April 2022 unless renewed. To ensure that museums and galleries have the certainty they need to plan exhibitions in advance, in 2020 the government will review the tax relief and set out plans beyond 2022.