The Government's policy of free admission to museums for pensioners, children and students could be scuppered because of a tax anomaly.
Customs and Excise has warned that the recent decision to allow in pensioners without paying may stop museums being able to reclaim VAT.
At some charging institutions, such as the Victoria and Albert Museum in London, more than half the number of visitors are soon likely to be entering without paying. As soon as that happened, Customs and Excise warned, the museum involved would no longer be considered a business and socould not reclaim VAT.
The spiral wing the V&A is developing will, alone, involve a £14m VAT bill, which it can currently reclaim.
Yesterday David Barrie, the director of the National Art Collections Fund, which campaigned for free admission and has highlighted the VAT anomalies, said the latest information could scupper the policy of free entry for children and those aged over 60. He said: "Naturally, the National Art Collections Fund applauds the latest step the Government has taken towards universal free entry. However, it would be ludicrous if a VAT anomaly were to cause the whole free admission policy to unravel before our eyes."
Mr Barrie is proposing an amendment be made to VAT regulations to allow free museums to recover VAT, in the same way the BBC, ITN and local authorities do.
The proposal does not require new legislation.
Lord Freyberg, another campaigner for free admission, said non-paying visitors would be likely to account for half the numbers now entering national museums. Visitor numbers have increased by 18 per cent in the past year, since children were allowed in free.
He said: "What a nonsense it would be if we have a situation whereby 'too many' free visitors results in in museums having to 'compensate' Customs and Excise."
Currently, museums that charge adults admission can claim back VAT, while the free museums such as the National and Tate galleries cannot. That in itself has proved a huge anomaly. The disclosure that allowing free access to the over-60s might stop the charging museums from reclaiming VAT is certain to put pressure on the Government to release national musuems and galleries from such payments altogether.
Tonight the independent candidate for London mayor, Ken Livingstone, will add his voice to those opposing VAT on museums when he launches his cultural policy. The Labour mayoral candidate, Frank Dobson, has called the VAT regulations of museums "preposterous."
A spokesman at the Department of Culture, Media and Sport said yesterday: "We are in constant touch with Customs and Excise. Yes, there is a concern here, but [they] have assured us they will not review arrangements until 2002."