More on the Guardian and UKUncut

Oh my, this is just too precious:

Guardian readers seem to be under the illusion that it is owned by a not-for-profit charity. The Scott Trust was wound up in October 2008 and the Guardian is a for-profit-privately-owned business, the well paid directors of which confirm in their annual accounts that they operate tax strategies in line with their fiduciary duty to the shareholders – just like any other business.
\"\"The old Scott Trust was set up in 1936 to avoid inheritance taxes and wound up in 2008 so that GMG could cynically exploit the SSE capital gains tax shelter to pay 0% in corporation taxes on their £302 million in profits that year. GMG claim that it was about modernising the holding structure, in fact it was a disingenuous cover for corporate venality.

I think I\’m reading Guido correctly here.

OK, so, The Guardian was owned by the Scott Trust. As was Autotrader etc.

So, when Autotrader was sold, they would have to pay corporation tax (or would it be capital gains?) on the money they made from selling Autotrader. I think I\’m right in saying that charities are only free from such taxes when they relate to charitable activities, not to commercial subsidiaries.

But, Gordon Brown and Ed Balls had changed corporation tax law. If you were a limited company (not a charity) selling off a subsidiary and reinvesting the money, then you would not pay corporation tax on that capital gain.

The implication here (and I would love someone to detail this, correct me on it) is that such a tax free disposal of a subsidiary/investment would not be available to the Scott Trust under the rules that applied to them.

So, the solution is obvious: wind up the Scott Trust, restart it as a limited company and hey presto, there no tax is due on the sale of a subsidiary.

In October 2008 it was announced that the trust was being wound up and its assets transferred to a new limited company named The Scott Trust Limited.[2] The purpose of this change was to strengthen the protection it offers to The Guardian.

And that\’s what they did. They wound up a charity and converted it into a limited company because the tax laws were better as a limited company than as a charity.

And remember people: these are the high and mighty who are tutting at everyone else about tax avoidance!

11 thoughts on “More on the Guardian and UKUncut”

  1. A minor point: I’m struck that you’re allowed to call a company by a name such as “The Scott Trust Limited”. Because if abbreviated to “The Scott Trust” it will mislead people, won’t they?

    Tim adds: If you are a Ltd you must, must, tell everyone that you are a Ltd. You’re not allowed to drop that (or PLC etc) from your moniker in any official sense.

  2. Re your corporation tax/capital gains question. Your instinctive hesitancy serves you well here. Only individuals pay capital gains tax. Companies make chargeable gains which then form part of their corporation tax return (CT600). These are therefore taxed as part of corporation tax.

  3. Tim, companies which are registered charities are allowed to drop the “ltd” (s60, Companies Act 2006).

    Not sure if that’s the setup here, but there is still a charitable Scott Trust Foundation registered with the Charity Commissioners.

  4. From the Scott Trust Foundation (registered charity) accounts:
    “At any time, the Trustees are the appointed directors ofThe Scott Trust Limited. The Scott Trust Limited is the ultimate owner of the Guardian Media Group plc (GMG) and the Scott Trust Foundation was formed to
    carry out the charitable activities of GMG.”

  5. “Only individuals pay capital gains tax.” Are you sure that Trusts don’t, Christie?

    “the Trustees are the appointed directors ofThe Scott Trust Limited”: are there directors other than “appointed directors”? Are there shareholders of this limited company other than The Foundation?

  6. dearieme – correct, trusts also pay capital gains tax. But charitable trusts generally don’t.

    And just the question I was asking myself – who owns the shares in the new company?

  7. Yes, trusts pay CGT not corporation tax, but the SSE is only available to companies. So if the Scott Trust directly held Autotrader they would have needed to move it to a company. The additional planning element is how they moved it to the new holding company. The “natural” approach would be for the Scott Trust to establish an intermediate holding company and then simply sell Autotrader to that – but such a step would itself result in CGT and stamp duty. So they wound up the Trust and distributed its property instead – the kind of classic tax planning that the Guardian is usually quick to criticise.

  8. As we’re being pedantic, strictly, it is trustees who pay capital gains tax, not trusts. Individuals and personal representatives are the only other persons who pay CGT.

    Has has been said, companies pay corporation tax on chargeable gains.

  9. Pingback: United Kingdom Riots - Page 50 - PPRuNe Forums

Leave a Reply

Your email address will not be published. Required fields are marked *