Guess how much tax The Guardian will pay on their billion quid profit here?

Guardian Media Group is selling its 50.1% stake in Auto Trader owner Trader Media Group to private equity firm Apax Partners in a deal thought to be worth £600m to £700m to the Guardian publisher.

The sale to Apax, which bought 49.9% of Trader Media Group in 2007 and has been GMG’s joint venture partner in the business since then, is thought to give TMG an enterprise value of about £1.8bn. The exact financial details of the deal were not revealed.

They made £300 million when they sold the other half. And between the two sales getting on for a billion £ in pure profit. Upon which they will pay exactly £0, bupkiss, in tax.

Now we could argue that it’s just SSE and that’s just fine because that’s the law of the land. Except they didn’t let that stop them shouting about Barclay’s, did it?

Oh, and why did the Scott Trust change into the Scott Trust Limited just before the first sale? Could it be because a trust cannot take advantage of SSE?

By Ritchie’s method of measurement this is clearly and obviously tax avoidance. Be interesting to see what is said really, won’t it?

16 thoughts on “Guess how much tax The Guardian will pay on their billion quid profit here?”

  1. Blimey! I didn’t realise the Guardian was losing so much money they had to sell the other half of the cash cow so soon!

  2. What is the justification for the substantial shareholdings exemption? Wikipedia claims that it’s for corporate restructurings, but I think a definition of restructuring that covers selling your core business to private equity for ready money is insanely broad.

  3. Let’s also see if as well as Richard Murphy, we get Richard Brooks at Private Eye and Margaret Hodge at the PAC, Bob Crow and Len McCluskey at the unions as well as the Milihandjob all denouncing this as tax evasion/unacceptable tax avoidance. Oh and all the epsilon semi-moron CIF commentators.

  4. @Tom – but that is a very common form of restructuring. If you need cash and don’t want to issue new shares, flog a slice to a private equity company

  5. If the sale is by GMG then the legal form of GMG’s owner(s) doesn’t really matter: whatever Scott Trust is, GMG should still get SSE.

    The justification for SSE was that lots of other countries (notably the Netherlands) have participation exemptions and it was considered that the UK should have one too, to avoid discouraging multi-nationals from setting up holding companies here.

    It does seem to be quite a broad tool for doing that, given that it allows UK-only SMEs to dispose of subsidiaries tax-free too, but then in my experience the proceeds they make end up being either recycled into new investments (arguably a good thing) or distributed out with tax at that stage (also arguably a good thing). As it happens I have a client at the moment doing the latter, and in fact if anything SSE seems not to be broad enough: if they do the wrong thing they could get an effective 28% tax instead of the 10% Entrepreneur’s Relief that clearly ought to apply.

  6. No, no Tim, it’s all about ‘paying their fair share of tax’.

    As good Lefties, that equates to zero. You see, they pay their dues by way of ‘social capital’ or some b*ll*cks.

  7. It annoys right wingers. It is therefore good. I rest my case.

    (PS, anyone not resident in the UK for tax purposes, we don’t care about your opinions.)

  8. Well, that’s just typical of you Worstall. What a cynic.

    I for one am absolutely certain that all the people named by BraveFart (see, I am reading the comments first now) will be up in arms tomorrow, just you wait and see.

    And while I’m at it, I want to complain in the strongest terms about the unwanted presents that are still sitting in the hearth waiting to be collected. It’s been 26 days now Santa, where the hell are you?

  9. @ Luke
    It is the hypocrisy that annoys right-wingers, not the SSE.
    We just think the latter is stupid, but then it was introduced by the last-but-one Chancellor of the Exchequer so we expect it to be.

  10. john77 – I am a right-winger but think SSE is reasonable because it stops all the bizarrely complicated arrangements that groups of companies used to get into to avoid tax when nothing much of economic significance was happening – such as here, the Guardian is trying to free up some cash. If they get the cash, they pay salaries (taxed), business rates, VAT, maybe even corporation tax. If they don’t get the cash, they fold and no one gets any tax.

  11. So Much For Subtlety

    Diogenes – “the Guardian is trying to free up some cash. If they get the cash, they pay salaries (taxed), business rates, VAT, maybe even corporation tax. If they don’t get the cash, they fold and no one gets any tax.”

    It is a bit meean to say so, but is there any way whatsoever in which Britain is not a better place if the Guardian folds? Seriously, apart from a small loss to the Heritage of Britain, how would the complete disappearance of the Guardian, their archives, maybe even everyone who has ever worked for them, not make this a greener and more pleasant land?

    But for the substance, if the government taxed me less I would get the cash, pay salaries, spend more, pay VAT and so on. So either it is reasonable we are all taxed less. Or not. It isn’t that the Guardian should be paying more. It is that they are hypocrites for attacking others for doing what they have done (and are doing).

  12. Pingback: The Guardian makes massive profit on Auto-Trader sale and pays no corporation tax – Civil Society demands it | The Justice for Taxes Network

  13. @ Diogenes
    That was the excuse for introducing it but the effect is to eliminate most of the tax that should be paid by “private equity” firms on their windfall profits. Previously PE firm A took public firm B private when sector deeply out-of-fashion, sacked lots of employees (especially those engaged in long-term research) to reduce short-term costs, refloated when sector back in fashion, made lots of £, paid CGT. Now it can avoid CGT by selling 100% to PE firm C after the sackings before the refloatation.

  14. @Pellinor
    “If the sale is by GMG then the legal form of GMG’s owner(s) doesn’t really matter: whatever Scott Trust is, GMG should still get SSE.”

    The last time I looked (and it may have changed), the legislation specifically referred to disposals by companies as distinct from any other type of legal entity, so any prudent tax planner would have made sure that the revant disposal was made by a company not a trust.

    Tellingly the disposal was of the last 50.1%. If they had sold less than that, the current disposal would qualify for SSE, but any later disposal of the residual would not.

    @Diogenes
    ” I am a right-winger but think SSE is reasonable because it stops all the bizarrely complicated arrangements that groups of companies used to get into to avoid tax when nothing much of economic significance was happening – such as here, the Guardian is trying to free up some cash.”

    Not much happening? Apart from the realisation of a £1billion capital gain? UK tax law has plenty of opportunities for groups t move companies around within the group under no gain/no loss transactions, but a disposal to third party should always be subject to tax. The reason it isn’t in this case is because G Brown is a fool, and he did what his private equity backers told him to do.

  15. @ Diogenes: You don’t look through the company making the disposal to the shareholders, you just look at the company which holds the substantial shareholding. So far as I know, the Trader Media Group shares are held by Guardian Media Group plc, all the shares in which are held by the Scott Trust. As GMG Plc is a company, SSE on the disposal of the TMG shares will not be affected by the Scott Trust’s legal form.

    Actually, there is one potential impact now I think about it more. The company making the disposal needs to be a member of a trading group before and after the disposal. So long as Scott Trust was a trust, the relevant group would be that headed by GMG; now that GMG is owned by Scott Trust Ltd, that company will also be in the group. Assuming that GMG Plc and everything below it is trading, then all the inclusion of STL could do would be to remove the SSE, if the activities of STL are non-trading and of sufficient magnitude to tip the STL group over into being non-trading once TMG has been sold. That seems unlikely, but so far as I can tell the transfer to STL is not helpful for SSE purposes.

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