The government has recently introduced a new form of tax relief specifically targeted at museums and galleries that could result in a payable credit from HMRC of up to £100,000.
The Museums and Galleries Exhibition Tax Relief was introduced in April 2017 and sits within a wider range of tax reliefs designed to support the creative sector. However, it is quite unique in the fact that it is intended to be used solely by charities and local authorities. This means that organisations which may be completely exempt from corporation tax can still apply for the relief and take advantage of the tax credit available.
The relief can be claimed on qualifying exhibitions. This is any exhibition which is a curated public display of an object or a collection of objects which are considered to be of scientific, historic, artistic or cultural interest. There are specific exceptions to this including if the main purpose of the exhibition is to sell, promote or advertise goods or services. Exhibits which are for sale, alive or in connection with a competition of any kind will also disqualify the exhibition, as will live performances - unless they are a merely incidental element of the overall exhibition. Another condition is that at least 25% of the core expenditure of the exhibition must be incurred within the European Economic Area (EEA).
Despite these conditions, it is likely most new exhibitions in the UK will qualify for the Museums and Galleries Exhibition Tax Relief. Moreover, the relief itself is quite generous. Working in a similar way to Research and Development Tax Relief, it allows an exhibition production company to claim an additional deduction equal to 80% of the total core expenditure incurred, or all of the core expenditure arising within the EEA if lower. This can be offset against any trading profits to reduce the company’s corporation tax liability.
If, as will be the case for most museums and galleries, the company has no taxable profits to offset against, a tax credit can be claimed. This will result in a cash repayment from HMRC. The tax credit available is equal to 20% of the surrenderable loss up to a maximum of £80,000. This can be increased to 25% of the surrenderable loss up to a maximum of £100,000 if the exhibition meets the criteria of a touring exhibition.
Museums and Galleries Exhibition Tax Relief presents a rare opportunity for entities operating within the museums and galleries sector to obtain a cash rebate from HMRC. The flexibility of the conditions of the relief means that a wide range of exhibitions will qualify. Furthermore, the significant amounts of the additional deduction and tax credits available could change a potentially financially unviable exhibition into a genuine and realistic opportunity. This will allow museums and galleries to run more exhibitions that visitors want to see.
Our experienced tax consultancy team at Armstrong Watson LLP are well placed to assist you in making a Museums and Galleries Exhibition Tax Relief claim. To find out more about creative industry tax reliefs and the other ways we can help your organisation, please visit our website.
For help and advice regarding Museum and Galleries Tax Relief please get in touch with Olivia Rawlinson.
