The Guardian on The Guardian\’s tax affairs

Alan Rusbridger tells us it is all very complicated.

Which, of course, it is.

I do have to say that I am amused that there is no possibility of commenting upon the piece as yet.

However, here\’s the question that we (or I) would really love to have an answer to.

Scroll forward nearly 80 years, and the Scott Trust is still going strong. It was reconstituted in 1948 and 2008, in order to carry on doing exactly the same as it\’s always done. It is now a limited company, with five trustees owning the shares.

Yes….

GMG has, over the years, made some shrewd decisions and investments, not least the purchase of Auto Trader – a magazine (and now highly successful website) for selling cars. Auto Trader has at various times been solely owned by GMG. At other times it has shared ownership with John Madejski, Hurst Publishing, BC Partners and Apax Partners. These changes in ownership have been done for assorted reasons: to maximize the income at a particular time, to build up the value of the company or to protect the group from having too many eggs in one basket. GMG\’s portfolio today largely consists of its share of Trader Media Group (TMG) and Emap, which it purchased with the cash realised from the sale of 50% of TMG.

Yup.

The low charge is on the exceptional part sale of the Auto Trader group. No complicated planning was needed to produce a low tax-charge: the government allows for tax to be deferred in this case if funds are reinvested.

The Guardian did reinvest the funds. That\’s not artificial, offshore, or complex. Indeed, it is tax compliant: the company is doing what the government wants, and for which it provides a relief. So let\’s stop the nonsense about low tax rates now: it\’s just wrong.\”

Quite.

Now, the question is about the combination of these things. I\’m not a tax expert (as everyone knows) so I really do not know the answer to this. But I would love to get one.

There\’s a reorganisation from the Scott Trust to the Scott Trust Limited in 2008.

2008 is also when that 50% sale of Autotrader went through, leading to the £300 million profit which was not taxed: quite righteously not taxed because it was a subsidiary of Scott Trust Limited and the sale of a subsidiary of a limited company is not, under the SSE rules, subject to corporation tax (technically, a chargeable gain).

The question is: if the Scott Trust had not reorganised into the Scott Trust Limited, would some form of tax have been due on that £300 million?

That is, did the reorganisation alleviate some of the tax bill on that capital/chargeable gain?

Anyone actually know?

27 comments on “The Guardian on The Guardian\’s tax affairs

  1. What a cheeky fecker. All the allegations against the Guardian are the same as they made against Barclays. And his indignation at how unfair they are just shows what utter hypocrites the Guardianistas are.

  2. They make out that there is no difference between ‘The Scott Trust’ (the original one) and ‘The Scott Trust Ltd’. Surely legally they are entirely different entities? Is it not very misleading to continue to refer to ‘the Trust’ when a trust no longer exists, but a limited company does? Being economical with the actualite even?

    One assumes that whoever owns the shares ‘could’ if they so chose, sell them. Legally if they are the owner, they can sell them. So unlike a trust, The Scott Trust Limited is ‘potentially’ available for sale, in the right (highly unlikely) circumstances.

    And as for the cross subsidy – the other media investments – it seems to me to be rank hypocrisy to be in bed with people such as Apax in order to generate the funds to keep the Guardian afloat so it can criticise other people for doing exactly the same………..

  3. Its about time we stopped taxing or not taxing organisations by the kind of name they have on the sign over the door. We should stick to taxing people, since they pay the corporate tax bills in the end, anyway.
    That would put a lot of Corp tax lawyers out of a job, so don’t expect to see much lobbying for it though.

  4. Richard Murphy persists in saying that no tax was avoided because the proceeds of the sale of Autotrader was reinvested. This is not the case, tax was avoided because, broadly, the sale of a subsidiary is exempt. The fact that the proceeds were reinvested is neither here nor there.

  5. He admits that putting the Manchester Guardian into a trust was a tax dodge – but its OK so long as you don’t profit personally from it and you do it for the good of society.

    He skips over the change in the tax status of the trust by saying it was reconstituted. In actual fact it was dissolved and a new totally different company created which just happened to have the same name. A pheonix company in effect and they don’t have much of a good press in general.

    He says the new “trust” is good because it can’t be sold, got nothing to do with the tax status or profits of the company.

    He then goes on about the Guardian has never been designed to make money. It has always had to get investment from the other parts of its owner’s diverse interests. So Autotrader props up the Guardian in effect is what he says. Skipping over the fact that a large majority of the money comes from the nasty hedge funds and other financially astute procedures.

    Having Murphy analysis the accounts doesn’t say much. He’s a scourge of tax dodgers so long as you are on the opposite side. If you are on his side then you can do no wrong. Would be much better to have an analysis by critics of the GMG tax affairs.

    Saying that the CT bill is low because it was reinvested according to the law is OK, but ignores the change in status of the trust. It also admits that avoiding tax is perfectly acceptable – so long as you call it compliance. Avoidance is compliance. It’s like calling something “progressive” to try and intimate that it’s a good thing when it reality its not.

    At the end of it he still doesn’t admit that Barclays low CT bill is because of losses the previous years which perpetrates the view that what Barclays did is nothing like GMG’s actions – when it fact it is, just a different route to tax compliance.

  6. The Guardian is also the only paper which also allows its staff a vote on who gets to be editor.

    I’ve been looking for evidence to reply to Chris Dillow about his “staff can run companies” idea.

    (The Scott Trust won’t exist in a decade at the rate they’re losing money).

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  8. So as well as avoiding tax when the trust was set up, the profits from profitable businesses, which would otherwise be paying tax, are diverted to the loss making left wing newspaper. Sounds like we are all subsidising the paper

  9. The Scott Trust status is a distraction. The 2008 accounts show that they disposed of 49.9% of Trader Media Group, owned by GMG (not the Trust). And they got Substantial Shareholdings Exemption, equivalent to a tax giveaway of £98.4m, on it.

    That’s exactly what Barclays did in arriving at its “1%” rate. So I’m a bit baffled why they made such a Horlicks both in their original Barclays article and in Rusbridger’s quasi defence.

  10. Intentions, it’s all about intentions. Guardian has good intentions and is therefore right to avoid paying tax. Barclays has bad intentions (i.e. not the same intentions as Guardian) and is therefore wrong in anything it does including avoiding tax. It’s as simple as that.

  11. Hey Tim, how about engaging with the actual substance of the Rusbridger article? You know, this bit:

    “If the argument is that no one should write critically about tax avoidance unless they can show total purity in all their dealings and investments, both personal and corporately, then the probable blunt truth is that not a single journalist would be able to write on the subject.”

    Go on, I dare you.

    Tim adds: Eh? Why should I need to “engage” with something which is an obvious truth? You expecting incisive articles on how the sky is blue, water wet etc?

    I’m afraid that my arguments about The G (and Ritchie etc) are not about their tax dodging. They’re about their moralising. I would tu quoque Boris if he were to sing the praises of monogamy, just as I will tu quoque somone who rails about the evils of income splitting and income splits and someone who uses a tax relief they would criticise others for using.

    I have no problem (in moral terms, I would remain free to criticise specific proposals of course) with people saying that the tax laws should be changed in this or that manner. And I critique some proposals in exactly this manner: Gantip because it introduces vagueness into the law, country by country reporting because it ignores Coase’s Nobel winning insight into why firms exist, estimates of the tax gap which use headline and actual rates paid without pointing to the righteous and justly taken allowances.

    In moral terms I critique some for what I see as moral failings: pointing to Barclay’s profits paying little tax because of SSE but not mentioning that SSE while defending one’s own payment of little tax because of SSE. Calling income splitting tax abuse while insisting that one’s own income splitting is righteous and just…..those are, to my mind, moral issues.

    In fact, as Ritchie himself has said on his blog today: we’re all sinners, so of course those who do the investigating will be sinners too.

    I’d just, on that moral point, add the one about motes and beams?

  12. “If the argument is that no one should write critically about tax avoidance unless they can show total purity in all their dealings and investments, both personal and corporately, then the probable blunt truth is that not a single journalist would be able to write on the subject.”

    It’s a straw man.

    Next.

  13. Nick Shaxson, what Rusbridger says is the argument is not the argument. (Can you say ‘straw man,’ boys and girls?) The argument is that Rusbridger is a hypocrite, and that the ‘Guardian’ articles are hypocrisy in print. Is he doing what Barclays did? Yes, he is. Does he admit it? No, he doesn’t. Is what Rusbridger did legal? Yes it is. Is what Barclays did legal? Yes it is. Does Rusbridger admit it? No, he doesn’t. Are you a bear of very little brain? I have my suspicions.

  14. As a couple of posters above have said there is no connection between the SSE and the winding up of the Scott Trust. This is because:

    1. the sale of the shares in Trader Media Group (owner of Auto Trader) took place before the trust was wound up

    and

    2. the change from the trust to the Ltd company would, in any case, not affect the SSE position.

    The Wikipedia entry accusing the Guardian of changing the status of the Trust to avail itself of the SSE is, therefore, a load of crap.

    As I have posted before having a share disposal covered by SSE is not avoidance. No claim involved as (if the relevant conditions are met) SSE (for obvious reasons) is mandatory.

    I seem to recall that when the Guardian’s series on tax avoidance first came out some time ago it was its critics (many of them on this site) who accused it of engaging in tax avoidance in relation to the sale of Auto Trader . If it’s avoidance for the Guardian then it’s also avoidance for Barclays.

  15. “If it’s avoidance for the Guardian then it’s also avoidance for Barclays.”

    I think that’s the very point. And it’s the Guardian doing the accusing.

    Barclays, being rather more polite, have not said “right back atcha!” But we don’t need to be so polite to institutional hypocrites.

  16. Nick Shaxson, is that why you refused to disclose your own tax affairs when challenged to at Chatham House, despite calling for greater transparency from others?

    Be interested to know what tax planning you use. But of course I respect your right to privacy.

  17. @me: if SSE is ‘ok’ why didn’t the Guardian point out that one reason why Barclays tax payment was so low is that they had availed themselves of this entirely legitimate allowance? One that the GMG had themselves used only the previous year? Why was the figure of £11.6Bn of ‘profit’ used when anyone who had a passing knowledge of accountancy knew it was much lower, around £5.3bn?

    They couldn’t possibly have mislead the readers for journalistic effect could they? To try and portray Barclays in the worst light possible?

    Whatever happened to ‘Comment is free, but facts are sacred’?

  18. Worstofall you ask:
    “The question is: if the Scott Trust had not reorganised into the Scott Trust Limited, would some form of tax have been due on that £300 million?”
    The asnswer is no.
    You say:
    “I’m not a tax expert (as everyone knows)”
    Too fucking right. So why do you pontificate about it?

    The answer is

    Tim adds: The answer is that sometimes I’m right and sometimes I ask questions about whether I might be right or not. In being right and in being willing to question my results I’m two steps ahead of Murphy then, aren’t I?

  19. Jim: do you agree that SSE isn’t avoidance? I hold no brief for the Guardian or the accuracy of its reporting. What I am saying is that it has been accused by people on this site of avoiding tax by not paying any tax on its sale of Auto Trader. Do you agree it has not avoided tax? I am quite happy to say that, on the basis of the facts of which I am currently aware, Barclays is not guilty of avoiding tax on the sale of its subsidiary.

  20. “What I am saying is that it has been accused by people on this site of avoiding tax by not paying any tax on its sale of Auto Trader. Do you agree it has not avoided tax?”

    Oh, it’s avoided tax all right. And legitimately so. But it’s a nest of of hypocrites for criticising others for doing exactly the same. Do you not get it? Tim’s explained it well enough several times. Are you just plain thick?

    No matter how many times we make this point, you socialist shills just don’t get it. I’ll say it again: YOU’RE HYPOCRITES.

    And one more time, in case there’s a chance it sinks into the mushy easily-led adolescent minds you have. YOU’RE HYPOCRITES.

    Perhaps you don’t know what the meaning of the word is? I’ll tell you: “Do as I say, not as I do”. It’s what you on the Left are like. It pretty much defines you.

    You like to tell other people about how we mustn’t pollute the environment, as you jet off to your second home in Tuscany (viz. Polly Toynbee).

    You like to tell other people about how inequality is so bad, as you jet off to your villa in Tuscany (Polly again).

    You like to tell other people how bad it is to pay interns nothing, as you pay interns nothing (just about every Labour MP and most certainly the felt-haired muppet-lookie-likey Ed Miliband).

    And what does this hypocrisy mean? Well it means that those leaders on the Left don’t believe what they say, that what they’re actually doing is attempting to emotionally manipulate the mushy-brained ones out there (e.g. you) into handing over political power and wealth to the hypocrites.

    Just naked self-interest, that’s all it is.

  21. (The Scott Trust won’t exist in a decade at the rate they’re losing money)

    Nor would News International (note: not News Corp). I don’t think that proves much about either model of ownership, although it does say something about the profitability of the newspaper industry.

  22. @me: SSE is what the State decreed you may do if you sell a subsidiary company. Now I’m not sure if it is the case you have to claim SSE, and if you have a spectacularly bad accountant who didn’t know about it and filed your accounts without doing so, then whether you would pay the whole tax amount, and HMRC wouldn’t bother to tell you.

    If this is the case, that you COULD pay full tax on a subsidiary sale, then I suppose SSE is a form of tax avoidance, in that you have to actually do something to get it, even if its just ticking a box.

    I mean is it possible to declare all your income and not use the personal allowance? If so, using it is a ‘form’ of tax avoidance.

    That is the definition of tax avoidance – using the LEGAL methods provided by LAW to reduce your tax liability. The corollary being presumably that if you didn’t use the particular allowances you WOULD pay more tax. I’m sure there are plenty of ways you can pay more tax if you want to. That is what all this stupid fandango is about – whether it is morally correct that we may take full advantage of what the law says (and the courts decide) or whether we should have some giant Richard Murphy figure looming over us applying his version of morality on our tax affairs.

  23. Here’s a summary of Rusbridger’s article:

    Well, umm .. er, yes. Um … while it may be true we did engage in a little bit of creative behaviour to minimise our tax bill, errrm … um ….. we’re nice people who think nice thoughts ….. and believe in global warming and shit …. so, um …… erm ….. that’s nothing like what those nasty bastard bankers at Barclays (who used to have South African interests back in the bad old days) are doing. Nothing at all. Now read this artixcle about how Barclays executives use the tax money they don’t pay to fund trips to the South Pole where they like to strangle baby polar bears.

    Phew! Do you think I persuaded them?

  24. kay tie: You seem to think I have some sort of connection with the previous Labour Government. I don’t know why because it wasn’t vaguely socialist. Anyway thanks for the rant I think I may have hit a nerve, I don’t know why you are mentoning Polly Toynbee and my home in Tuscany. I don’t have a home in Tuscany. I’m not even sure what Polly Toynbee has to do with me (quite a lot of the time she spouts absolute rubbish). What’s this bit about polluting the environment?

    You accuse me of:
    being a socialist
    being adolescent
    having a second home in Tuscany
    telling people not to pollute the environment
    telling people that it is bad to pay interns nothing
    telling people inequality is bad
    handing over political powerand wealth to the hypocrites

    Only one of the above is true .

    Worstofall and Jim. I may reply to your postings later if I can be arsed but for the moment I am going to bed.

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