Reference: P.S.1496/44
(1) The Memorandum enclosed by the Vice Chancellor of Oxford with his letter of 10th June 1944 to Sir Alan Barlow is concerned with the effect of present taxation (particularly the Excess Profits Tax on the work of the Oxford University Press.
The Press, which is the Department of the University of Oxford, produces and publishes books and journals for the advancement of learning and research, education and religion. In pre-war days it was engaged on a mixture of commercial and "charitable" work, the term "charitable" being used to describe works such as the production of text books, scientific works and research journals which could not be expected to be undertaken profitably. The profits of the commercial work paid for the losses on the "charitable" work, and only the balance was subjected to tax, leaving a margin available to meet the cost of extensions and developments of the business.
The Memorandum states that during the war the Printing Department has been required to undertake urgent Government work which has gradually excluded all "charitable" work; that taxation (particularly E.P.T.) is absorbing the profits made on the commercial work while stocks of the "charitable" publications are being used up and arrears of "charitable" work are accumulating; and that with its depleted resources it will be impossible for the Press to carry on its pre-war functions and provide for its deferred "charitable" commitments at post-war price levels.
The suggestion is made that the Press should be relieved altogether from E.P.T. in view of its special circumstances and obligations, or alternatively, that the effect of its incidence should be mitigated by a capital standard and a revaluation of the capital employed, since its capital expenditure was not recorded until 70 years ago whereas some of its assets were acquired as far back as the Seventeenth and Eighteenth centuries.
On the instructions of the Chairman the case has been examined with a sympathetic eye by the Chief Inspector.
The question whether the Press might be entitled to Charity exemption under Section 24, Finance Act 1927 was considered, but it was found that the Press had not previously pressed such a claim, and further that a claim made under this Section by the Cambridge University Press has been refused by the Special Commissioners. In these circumstances it was not felt desirable to invite the Press to make a claim, particularly at a time when it was engaged almost entirely on ordinary printing work for the Government - work which is outside the primary purpose of the Press.
As regards the effect of E.P.T. both the Deputy Chief Inspector and Mr Batty were inclined to think that the fears expressed in the Memorandum were unduly pessimistic. Rough calculations showed that the Press had a substantial profits standard (probably about £57,000 before taking into account adjustments for increased capital). It was probable, however, that its standard profits would be even higher since the intention of claiming a capital Standard had been expressed. The Press would have these standard profits each year, its E.P.T. post-war credit, and its post-war commercial profits out of which to meet its requirements in regard to "charitable" work, and it was quite likely that the higher level of post-war prices would result not only increased losses on the "charitable" work but also in higher profits on the commercial work. It was considered, however, that the situation might be alleviated on the lines of a sympathetic examination of the capital position, and a substituted standard computed by reference to the real capital employed in the business has been negotiated between the District Commissioner and the Accountants to the Press. This has been agreed at a figure of approximately £88,000, and on the basis of this figure there is no liability E.P.T. until the year to 31st March, 1944, for which year about £100,000 E.P.T. is estimated to be payable.
The standard, which has taken account of the whole of the capital employed by the Press, is one which would be regarded as just in the case of a business which was employing that capital in trading on a commercial basis. The allowance of such a standard gives recognition to the fact that profits now earned by the Press are mainly attributable to its commercial work, and in the view of the Chief Inspector mitigates the hardship which arises because the profits subjected E.P.T. have not been reduced by losses on "charitable" work.