Julian Ravest (see below) is completely correct on his first point.  The
UK Parliament's Treasury Committee has this morning strongly criticised
the presentation of the new three year spending plans and especially the
claims of additional money, which - the committee claims - have been
greatly exaggerated because by changes in accounting and presentation
practices.

(I doubt if they have looked at the Culture Dept. figures in detail, but
the Committee claims that in relation to Education at least half of the
claimed UK#16 billion "extra" money over the next three years is not real
- just a result of these accounting and presentational changes!!)

However, the claim that museums are being "given" tens of millions of
extra money needs to be regarded with some caution, suspicion even.

Julian's second point - concerning the financial advantage that some
museums have recently gained through introducing compulsory admission
charges in relation to Value Added Tax (VAT = the European Union's Sales
and Services Tax, charged at between 17% and 24% according to country) -
is not so straightforward.

He is correct in what he says about what has actually happened, and why
national museums currently feel pressured into introducing admission
charges in order to gain the considerable tax benefits that the "charging"
museums have gained over the past two or three years. However, there is
growing evidence that this "advantage" is a loophole in the British
administration of VAT that should not have existed.  The European Union's
Directive (i.e. administrative law) on the taxation of non-profit cultural
and educational bodies adopted in 1991 was supposed to exempt ALL such
bodies from VAT (in the way that similar non-profits elsewhere in the
world, such as the USA receive sales tax benefits etc.).

When the UK government finally got round to introducing the new European
law (four years late, in 1995) they re-wrote the regulations and
application to produce the effect Julian summarises very clearly below.

However, only yesterday the London Zoological Society got a court
declaration that the British practice is contrary to European (and hence
British) law and that they ought to be VAT-exempt.  If this is upheld
after the inevitable appeal by the British tax authorities (either by the
British courts or eventually by the European Court) then all UK Trustee
museums (including all the national museums run by a voluntary board as
non-profit charitable trusts) will get the VAT exemption whether they
charge for admission or not.

Also, the UK court decided that the Zoo is entitled to a full refund -
with interest - of all the VAT illegally charged by the British government
since the European Directive became law in 1991, so large numbers of
museums (together with non-profit theatres, orchestras etc. - also
illegally taxed) may well be in for multi-million refunds sometime in the
next few years. (The two important exceptions are those still directly run
by government departments, such as some armed services museums, and local
authority museums - which have always been fully exempt from VAT (or
more accurately "zero-rated".  (Don't ask!! I could explain the
difference, but off-list please if you are desperate to know!!).

Patrick Boylan

=======================================

On Wed, 29 Jul 1998, Julian Ravest wrote:

> I would add to Patrick Boylan's comments that the amount of money on
> offer by DCMS to Museums as a substitute for charging does not appear to
> be sufficient.  In Britain charging not only provides direct income,
> (This may not be much more than can be obtained by "voluntary" donations
> at the door.)  More importantly, charging allows the Museum to reclaim
> VAT, (Value Added Tax).  This benefit often outweighs the direct income
> gain from admissions and can be particularly significant where the
> museum is engaged in any major capital project, eg Lottery supported.
> It appears that the offer by the DCMS does not include compensation for
> this VAT reclaim benefit.  Unless it does there is the possibility of
> one Ministry giving money which is taken back by the Treasury, plus some
> more.  The Museum may well lose funds in the process.
>
> Thus, any reluctance of museums to accept the Governments offer may have
> more to do with accountancy than with philosophy.
>
> Gift horses must be carefully examined.