Admitting the public free of charge would normally mean an institution cannot recover VAT on supplies they buy, but under the VAT refund scheme qualifying museums and galleries are able to claim back VAT incurred in relation to the collections for which there is free access, the buildings in which they are displayed, and their storage and restoration.

The Design Museum currently charges visitors up to £12.40 for a visit to its existing premises in Bermondsey, but after a planned move to new premises in Kensington is completed in 2016, there will be no entrance charge for the first time in its history.

The new museum will be housed in the Grade II listed former Commonwealth Institute, refurbished by British designer John Pawson, close to the V&A, Science Museum and Natural History Museum.

Visitor numbers are expected to more than double to over 650,000 in the first year. The Design Museum  expects to get up to £1.8m VAT back on the construction costs of their new building and around £150,000 in VAT on running costs each year.

On a visit to the museum, Osborne said: ‘The Design Museum is world renowned for contemporary design and architecture so it is fantastic news that they are moving to these brilliant new expanded premises in heart of London. That is why I am delighted to be offering help through the VAT refund scheme to ensure as many families as possible can visit at no charge at all.

‘This is all part of our long-term plan to make Britain and London a great place to visit with the economic benefits that come with that.’

The VAT refund scheme supports around 120 museums and galleries across the country, including the British Museum, Imperial War Museum and National Gallery. It is worth around £60m each year to the sector.