Museums and galleries exhibition tax relief

Last year the government continued its drive to support UK creative industries with the introduction of museums and galleries exhibition tax relief (MGTR).

This new form of relief is aimed at exhibitions, both temporary and touring, encouraging museums and galleries to develop creative new exhibitions and display their collections to a wider audience. HMRC estimate that over 1,500 institutions in the UK are eligible to apply for MGTR.

The relief allows charitable companies to claim an additional deduction when computing their taxable profits or a payable tax credit where that deduction results in a loss.

Who can claim?

To qualify for the relief you must be a charitable company, wholly owned by a charitable company or wholly owned by a local authority.

Moreover, the company must make an effective creative/technical contribution; negotiate, contract and pay for rights for good and services in relation to the exhibition; actively engage in decision-making; and be responsible for the production of the exhibition.

What exhibitions are eligible?

Unlike other aspects of creative tax relief, museums and galleries exhibition tax relief does not require any form of cultural test. However, the exhibit must also be open to the public and not restricted by membership requirements or private viewing.

In addition to this, at least 25% of the core expenditure on the production must be spent in the European Economic Area (EEA).

Certain exhibitions including those where anything displayed is for sale or alive, those where a live performance is the main focus, and those that are organised in connection with a competition are excluded from the relief.

What costs can be included?

An exhibition is broken down into 4 main stages: developing, producing, running and de-installation.

Core expenditure only includes costs incurred directly on the production (i.e. exhibition installation, equipment hire, curator and research costs, exhibition-specific insurance and transportation, exhibit loan costs, and some storage costs), and if the exhibition runs for less than 12 months, de-installation and closing costs.

Costs that can't be included are day to day running activities (marketing/legal/accounting), security once an exhibit has opened, further development of the exhibition, purchasing of exhibits, or expenditure on infrastructure (unless it is solely for the exhibition).

It is worth noting that costs only qualify as core expenditure if they are paid within 4 months of the accounting period which you are claiming in.

How much is it worth?

Tax relief can be claimed on costs after 1 April 2017. Where an exhibiting company is profitable, MGTR reduces the company's tax liability by up to 15.2% of the qualifying costs.

However, if a company is loss-making or does not pay corporation tax, then the lower of this loss or the enhanced deduction can be surrendered in exchange for a tax credit repayment of 20% (25% if it is a touring exhibition).

The maximum repayable credit for a touring exhibition is restricted to £100k for a touring exhibition and £80k for a non-touring exhibition.

Example

A qualifying charitable company puts on a non-touring exhibition which has subsequently made a loss.

The total income (including ticket sales, royalties, grants and merchandise income) is £100,000.

The total cost of the exhibition is £130,000 of which £90,000 is core expenditure in the EEA.

How can Haines Watts help with your museums and galleries exhibition tax relief claim?

A museums and galleries exhibition tax relief claim must be submitted with a company's tax return. Therefore, you may find for the first time that you need to file a tax return with charitable pages.

Our tax advisors in Newcastle can help translate HMRC's complex legislation into plain English. We can identify qualifying costs, ensure your exhibitions qualify and carry out the application on your behalf, taking the burden off your shoulders. We can also support you with other aspects of Creative Industry Tax Relief.

Get in touch with us directly to find out more about museums and galleries exhibition tax relief.