Under the extension, the V&A Museum of Design, scheduled to open in Dundee in 2017, will be eligible to reclaim VAT on costs associated its collections. 

Embrace Arts at the Richard Attenborough Centre at the University of Leicester will also come under the VAT recovery rules and HMRC estimates suggest it will save £1.8m in VAT over three years.

In addition, the National Coal Mining Museum for England, which was previously included as part of the Science Museum, will now be entered into the VAT relief order as a separate institution.

The scheme will also be revised to accommodate some existing institutions opening new premises, and minor administrative amendments will be made to take account of the closure of some institutions and the renaming of others

Around £60m of support is provided through the VAT refund scheme each year to around 60 major UK institutions which are responsible for approximately 120 qualifying museums and galleries.  Admitting the public free of charge normally means a museum cannot recover VAT on its purchases. The VAT refund scheme for named museums and galleries supports institutions which allow free public access to their collections, by letting them reclaim VAT on costs associated with those collections.

Danny Alexander, chief secretary to the Treasury, said: ‘This is great news for the V&A Museum of Design, Dundee which will be the first ever design museum to be built in the UK outside London.

'Through this scheme, the UK government will be able to support the museum in showcasing Scotland's design heritage to the world, as well as hosting touring exhibitions from the V&A.’