YORK museums are fighting a tax battle which could save them hundreds of thousands of pounds, which is being watched carefully by anxious museum bosses across the country.

The York Museums Trust (YMT) is taking on the government agency which is in charge of setting business rates over increasing tax demands that could land the organisation with a steep bill in the next two years.

The case is the culmination of a years-old dispute between the Valuation Office and independent museums like the Castle Museum.

It is seen as a precedent that will have major implications for heritage sites all over the country, according to the consultant working for the Trust.

The finances are complex, and it is difficult to say for certain how much money is at stake, but if the YMT loses its case it could receive a back-dated bill for £500,000 by 2017, and see its annual bills grow over the coming years, said chartered surveyor Colin Hunter, of Lambert Smith Hampton.

The row had been "bubbling under" since the 1990s, but the YMT have decided to pursue their case all the way to the upper tribunal of the Valuation Office, because of the amount of money at stake, he added.

Mr Hunter is arguing that museums should be assessed for business rates in the same way as many historic buildings like National Trust properties - which pay little or nothing - rather than according to what rent the buildings could attract.

That would result in the "rateable value" from which business rate bills are calculated falling from £15,750 to almost nothing for St Mary's Church - a former church now known as the Heritage Centre in the Coppergate Centre, and from £154,000 to £37,000 for the Castle Museum.

This would help the YMT with its tight finances as public money dries up.

A lower business rates bill would help stabilise the museum's finances, and without it the YMT could face a "a serious shortfall", Mr Hunter said.

A spokesman for the YMT added: “Nationally and locally there are large inconsistencies in the amount of business rates paid by museums, galleries and other bodies caring for heritage buildings."

The YMT's work, with the Association of Independent Museums, to demand fairer treatment could help organisations across the country, he added.

Other York-based museums are watching carefully to see the outcome, and the York Civic Trust (YCT) also stands to benefit if tribunal judges rule in the YMT's favour.

YCT chief executive Dr David Fraser said more was at stake than the museums themselves.

"The prosperity of the City of York depends for a large part on visitors who are attracted by our unique collection of cultural centres run by non-profit-making organisations - including Clifford’s Tower, the Castle Museum, York Art Gallery, and York Civic Trust’s own Georgian museum, Fairfax House. Our visitors stay and spend their money in York’s shops, hotels and restaurants."

He added: "The rules on business rates are complex and depend on difficult definitions and opaque judgements when historic buildings and charities are involved.

"The recent proposals open up the possibility of business rates being increased, and might result in museums and other cultural attractions, including Fairfax House and the Castle Museum, struggling to stay open and failing to develop new ideas which maintain a constant stream of visitors. This will affect everybody in the city.

"York Civic Trust is very concerned about these proposals and is backing York Museums Trust in asking that all museums are treated fairly, and that charities providing a public attraction are not penalised."