Museums and Galleries Tax Relief: extending and widening this relief will boost the UK cultural ecosystem

Museum and Galleries Tax Relief came into effect from 1 April 2017, aiming to encourage the development of new exhibitions and incentivise their touring to a wide audience. Unusually, the legislation includes a ‘sunset clause’, which allows the relief to expire in April 2022 if it is not extended by the UK Parliament. We are around a year away from April 2022, so perhaps now is a good time to consider how well the relief is currently being used.

Whilst the relief was modelled on existing creative industry tax reliefs, there are some striking differences. As mentioned above, unless the relief is extended, it will expire next April. Claims are also subject to a cap of £100,000 (for touring exhibitions) and £80,000 (for non-touring exhibitions). This means the value of claims are substantially lower than in other creative industries’ tax reliefs, where no such cap exists.

Despite these caps, take-up of the relief has grown substantially over the years. Figures from HM Revenue & Customs (HMRC) show:

  • For 2018/19 £4 million was paid, covering 300 exhibitions included within 50 claims.
  • In 2019/20 £16 million was paid, covering 1,045 exhibitions included within 170 claims.

This is obviously an impressive increase in both the value and number of claims, especially for a 1-year period. So how does this compare to other creative industry tax reliefs? For 2019/20, the number of claims for Museum and Galleries Tax Relief is comparable to Theatre Tax Relief claims and is almost double the number of Orchestra Tax Relief Claims. The fact that there is a cap on the amount that can be claimed through Museum and Galleries Tax Relief has an impact on the total value of claims, but it does appear promising that the number of claims is comparable to the more established Theatre Tax Relief, which was introduced  3 years earlier.

All of this points to the fact that the relief is well used in the sector.  Many will undoubtedly have been disappointed to note no mention of an extension at the 2021 Budget. There is another chance for the Government to announce an extension; more tax policy details will be announced on 23 March and I hope that the UK Government will take the opportunity to not just approve the extension of the scheme but also to widen its scope. Currently many exhibitions which include live performances are not eligible for relief, nor are exhibitions that include objects which are for sale, and many organisations lose out on a cash injection as a result.

The Government could also consider widening access to the scheme. Currently, those organisations that provide public benefit, but are not charities, are not eligible.

Most museums and galleries are open to the public free of charge, so the money received from these tax relief claims boosts cash flow, giving a welcome boost of funding to these institutions so they can continue developing further exhibitions. An extension to the relief will be especially welcome in the coming years when, no doubt, we will continue to see the financial impact of the COVID pandemic on charity finances.

If you have any questions about Museums and Galleries Tax Relief, or any other creative industry tax relief, contact Catriona Finnie.

Creative industries tax reliefs

Museums and galleries tax relief became the latest addition to the Government’s suite of incentives for the creative industries, which can make arts and media projects affordable. Catriona Finnie, who heads up our Creative Industries Tax Relief offering, looks at a selection of reliefs most relevant to our clients. (This article first appeared in the Winter 2017/18 edition of our Connect newsletter.)

The UK has a package of tax reliefs designed to encourage investment in certain arts and media projects. Broadly, they all work in the same manner: eligible organisations can claim an additional deduction on qualifying costs and may be able to surrender some of their loss for cash from HMRC, equating to 20% or 25% of the core cost.

Museums and galleries tax relief can be claimed on costs incurred on temporary or touring exhibitions, but does not include general day-to-day running costs. The relief is open to charities, trading subsidiaries of charities, or subsidiary companies under the control of local authorities. Commercial organisations that run museums or galleries will not be eligible. Exhibitions must be open to the public to qualify, so exhibitions that are solely for selling purposes will not be able to claim.

Theatre tax relief, in general terms, is available for productions of a play, an opera, a musical, a ballet or other dramatic piece. Theatre tax relief is applied to each qualifying production, giving  potential tax relief for every theatrical production undertaken during the financial year. Tax relief is given according to qualifying expenditure which is, broadly speaking, the production and closing costs.

Video games tax relief allows companies to claim on qualifying UK expenditure, including those involved in the designing, production and testing of the game.

Film tax relief is a tax incentive for film production companies operating in the UK: limited budget films can claim a cash repayment worth 20% of qualifying expenditure, which usually encompasses costs related to principal photography and pre- and post-production.

Orchestra tax relief is available to orchestras comprising at least 12 instrumentalists who perform to live audiences. Eligible organisations can claim a cash repayment from HMRC of up to 25% of the costs incurred in producing the concert.

There are also tax reliefs available for:

  • High-end television production
  • Children’s television production
  • Animation

As you can see, each creative industries tax relief has specific eligibility criteria so get in touch to see if you qualify, or if you’d like more information on 0131 558 5800 or email catriona.finnie@chiene.co.uk.