Reference: P.S.1496/44
To: Deputy Chief Inspector
1. The Oxford Press have not previously pressed a claim for Income Tax relief either as regards taxed income, Schedule A, or trading profits.
2. The nearest comparable case may be that of the Cambridge University Press, but we have not yet sufficient evidence for judging how far the latter is in point.
3. The position as regards the Cambridge Press is that it is recognised as established for charitable purposes only and so given Income Tax relief in respect of investment income (Section 37, Income Tax Act, 1918), and Schedule A (Section 30, Finance Act, 1921). Relief from Income Tax in respect of trading profits (Section 24, Finance Act, 1927) was, however, refused on appeal in December 1940 by the Special Commissioners (T.1085/8/40 with T.1388/15/42 attached) whose decision ran -
"The trade exercised by the Cambridge University Press is principally concerned with printing and publishing for the outside world. Thus in our view specialised though it is and devoted to the production works of learning it extends beyond the purposes and scope of the University. We find that the trade, except in so far as it is concerned with work for the internal use of the University is not exercised in the course of the actual carrying out of a primary purpose of the University".
4. Recognition as a charity has been accorded by reason of the virtual identity between the Press and the University. The Syndics of the Press (corresponding to the directors of an ordinary Company) have been recognised as a Committee or Department or Agency of the University.
5. Exemption from War Damage Contribution was also accorded on charity grounds on appeal to the War Damage Commission. (W.D.C. 598/41 attached).
6. As regards W.D.C., the issue was, of course, concerned only with the nature of the proprietary interest and the user of the premises. This Department contended that the premises could not be said to be held for the advancement of education and learning because by Letters Patent of Henry VIII the University had power to print and sell books of every kind and such books might be of a non-educative kind. The Commission found that premises were held for the appropriate charitable purpose and were used solely or mainly in the carrying out of such purposes. The Commission stated in its decision that the Revenue contention as to the scope of activities did not give sufficient weight to the qualification in the Letters Patent of Henry VIII that only those books might be printed and sold which had been approved by the Chancellor or his Vice-Gerent and three Directors [sic], a qualification which, in the view of the Commission, confined the activities within the limits of the general object of the University to promote the advancement of education and learning.
7. When the Income Tax issue was before the Special Commissioners evidence as to the scope of activities did not include that of the Letters Patent to which the War Damage Commission obviously attached importance. If the Income Tax issue were again raised, particularly if evidence showed that the limitation implicit in the approval of the higher University authorities was observed as a reality as well as a possibility, I should feel less confident of our again establishing that the business did not carry out a primary purpose of the University and that even the work for the outside world was not inspired with the idea of advancing education and learning. Two years have now elapsed without their W.D.C. success encouraging the Cambridge Press to re-open the Income Tax aspect, but if they did and even if we now thought their chances of success better, the commercial competition aspect might make us think it desirable to leave it to the Special Commissioners to reconsider in the light of the further evidence.
8. Beyond casual inquiry the present occasion is the Oxford Press's first effort at raising the Income Tax issue. The facts so far given point to activities having much in common with those of the Cambridge Press. It does not, however, appear whether there is a similar limitation, and certainly some of its publications cannot be said to be wholly educational in the normal sense of the word, e.g., its World's Classics series, where the largest section is devoted to works of fiction.
9. The admission is made in the statement that to-day the Oxford Press is wholly engaged in Government work which is outside its "primary purpose". The title to relief under normal conditions would need to be abundantly clear for us now to concede both the charity and primary purpose points at a time when activities are at variance with charitable professions. We have had cases of established charities whose activities have been deflected by war considerations without our feeling it necessary to consider that such temporary deflection need bring charity title into present question, but this is a different matter from according charity title at a time when activities themselves are admittedly wholly non-charitable. A pertinent fact might, however, well be the status of the Press for accepting or refusing the Government work in question. If the Press could be required, e.g. under the Defence of the Realm or other requirements, to turn its efforts to Government work I do not think that this would have the same significance as work which it was at liberty to take or refuse.
10. The present representations embrace both I.T. and E.P.T. If the relief from I.T. were recorded it would carry with it relief from E.P.T. If I.T. relief failed apparently some E.P.T. accommodation might be possible. It seems probable that they are mainly concerned over E.P.T. and, if anything substantial were possible as regards the latter, they might be content with that rather than go to the trouble of trying to establish what they no doubt regard as a dubious case for I.T. relief.
11. It might be thought that they should be informed along the following lines -
Relief from Income Tax on this trading profits would be possible only if they established that
(a) the Press is a charity;(b) the profits are applied solely to the purposes of the charity and either
(i) the trade is exercised in the course of the actual carrying out of a primary purpose of the charity, or(ii) the work in connection with the trade is mainly carried on by beneficiaries of the charity.
(Section 24, Finance Act, 1927 amending Section 30, Finance Act, 1921).
For the position in this respect to be considered the information already given would need to be supplemented by the following -
(1) A full account of the origin, constitution and powers of the Press.If relief from Income Tax were so established Rule 7 of the Seventh Schedule, Finance (No. 2) Act, 1939 would operate to relieve the profits from E.P.T. also.(2) Particulars of any powers of control or approval of works reserved to the University or its officers.
(3) Copies of any relevant documents.
(4) A percentage analysis of turnover for the last pre-war years into the following categories: -
(i) Sales of books published by the Press with an indication of the proportion not of an educational nature (e.g., works of fiction, etc.).(ii) Printing done for the University.
(iii) Printing done for outside Colleges (as distinct from the University), Schools and outside bodies.
(iv) Printing of journals for learned Societies such as the Royal Society.
(v) Printing for other clients.
If, in the light of the above, a formal claim for Income Tax relief is not made or if made is not established, there would appear to be no ground for relieving the Press altogether from E.P.T. At the same time this Department will be glad to co-operate with the Press accountants in an attempt to arrive at the true capital employed in the business whether or not this capital appears in the Balance Sheets.
G. W. Booth
12th July, 1944.
* This follows the form of evidence put before the Special Commissioners in the Cambridge appeal.