Plans for the special tax relief for museums and galleries were announced in Budget 2016 and will come into force from 1 April 2017.

This new tax relief, available on qualifying costs of both temporary and touring exhibitions, but not for day-to-day running costs, will take the form of an additional deduction for corporation tax purposes which can be surrendered for a payable tax credit.

The relief will be capped at the lesser of 80% of core expenditure, incurred in any country, or the total core expenditure occurred in the European Economic Area. Any relief will be subject to EU state aid rules while the UK remains a member.

To claim the relief, a qualifying institution will need to submit an end of year tax return to HMRC, disclosing all expenditure that would qualify for the tax relief. Claims will be paid out within 40 days.

In line with other creative sector tax reliefs, indirect expenditure, such as the costs of marketing or financing, will not be eligible for tax relief.

Qualifying ‘core’ expenditure must be directly linked to the exhibition and would include:

• curator and research costs;
• exhibition installation;
• exhibit loan costs;
• digital spending;
• insurance and transportation costs;
• exhibition specific venue costs (including set-up) and equipment hire; and
• administration that is linked directly to the exhibition.

Certain costs will not be eligible for tax relief, including general museum costs and running costs, financing costs, legal and accounting fees, marketing and advertising, and acquisition costs.

The proposed definition of a museum is ‘a building or place devoted to the conservation, exhibition and educational interpretation of collections having scientific, historical or artistic interest’.

The proposed definition of a gallery is ‘a building or place that is used for the exhibition and educational interpretation of a collection of objects having scientific, historical or artistic interest’.

The tax relief will be available across the country.

In line with its concerns about earlier abuse of some tax relief schemes, particularly in the film sector, the government stresses that it will endeavour to ensure that the ‘tax reliefs should not create any additional avoidance opportunities’.

To qualify for relief, the institution will need to be within the scope of corporation taxes, for example a museum set up as a charitable company (or a charitable museum producing the exhibition through its trading subsidiary) or a museum set up as a subsidiary company under the control of a local authority.

The rate of relief has not been set but the government will outline the details after the consultation.

This consultation document sets out the details of the proposed tax relief and seeks views in key areas of its design.

There are already a number of other creative sector tax reliefs, covering films, high-end and children’s television, animation, video games, theatre and orchestral productions.

The consultation closes on 29 October. Responses should be sent to [email protected]

The Treasury Museums and galleries tax relief consultation is available here