1 April 2017 marked the introduction of a new tax relief for museums and galleries, although we await Royal Assent for the Finance Bill before the relief comes into force and claims can be made. At the foot of this update you will also find a free opportunity to discuss the possibilities of this new tax relief as it applies to your organisation.
The relief applies to touring and non-touring exhibitions effective from 1 April 2017 to 31 March 2022 and is a welcome extension of the creative sector tax reliefs, such as Theatre Tax Relief and Orchestra Tax Relief, which have been introduced in recent years. The aim is to encourage more and higher quality exhibitions, and also to support the touring of the best exhibitions here and overseas to raise the UK’s international profile. Following the 2016 consultation exercise (on which we have previously commented) permanent exhibitions are also brought within the new relief’s ambit. This extension is seen as being of particular benefit to smaller organisations, which should consider exploring the relief.
Key features of the relief:
- To qualify, an institution (it is the institution rather than physical location that matters) must be a "museum" or "gallery" which includes a library or archive, and has a site where a collection of objects that is considered to be of scientific, historic, artistic or cultural interest is exhibited outdoors or partly outdoors, for example a historic house or sculpture park.
- For the purposes of the relief, an “exhibition” is defined as a curated, planned, public display of an organised collection of objects, works and artefacts, which is considered to be of scientific, historic, cultural or artistic interest. A single object or work can make up an entire exhibition.
- The exhibition must be intended for the general public.
- The relief is a form of a deduction for corporation tax, which, importantly, can be payable as a tax credit rather than a tax relief (which is likely to be the case for museums and galleries with charitable status).
- As it forms part of the corporation tax regime, the legal structure adopted must bring the institution into that regime.
- The relief is available for the creation, development and set-up costs of temporary and touring exhibitions. It does not extend to expenditure such as running costs after the exhibition opens.
Rates of relief:
The relief is capped at the lower of 80% of the core expenditure incurred in any country and total core expenditure incurred in the European Economic Area (EEA) - provided that at least 25% of the qualifying expenditure is within the EEA. The two rates of relief are:
- 20% – for non-touring exhibitions; and
- 25% – for touring exhibitions.
The relief will allow museums and galleries to claim a credit of up to £100,000 on exhibitions that are toured and £80,000 on non-touring exhibitions. The maximum credit allowable is the equivalent of qualifying expenditure of £500,000.
To claim the relief, getting the right legal structure:
The claim is made in a corporation tax return and therefore for many charitable galleries and museums it may mean that the claim is made through a trading subsidiary, if that is appropriate. However, to do this, the trading subsidiary will need to be directly responsible for producing the exhibition. In deciding what is the right structure for the organisation, it will be important to think not only about the appropriate way to secure the tax relief but also wider governance consociations.
It will be possible for a qualifying institution to submit claims for qualifying expenditure incurred on and after 1 April 2017 when the Finance Bill 2017 receives Royal Assent, which is likely to be later this summer.