Reference: P.S.1199/50
Oxford University Press
1. A charity is entitled to Income Tax relief on the profits of the trade carried on by it if and only if the profits are applied solely to the purposes of the charity and either (a) the trade is exercised in the course of the actual carrying out of a primary purpose of the charity or (b) the work in connection with the trade is mainly carried on by beneficiaries of the charity (section 24, Finance Act, 1927). The primary object of the clause was to afford Income Tax exemption to educational charities on the profits of carrying on colleges and public schools; broadly speaking, it was not intended to grant relief to trading which competed with ordinary traders. (Previously relief had been confined to cases where the work in connection with the trade was mainly carried on by beneficiaries of the charity.)
2. The O.U.P. obviously cannot claim to fall under subhead (b); any claim to relief it might make must stand or fall under subhead (a). But even on this subhead the Board's view is that the claim would fail. The history, in brief, is as follows:-
(a) The position of the O.U.P. was considered by the Board when the 1927 Finance Bill was going through the House. It was stated that the Press was carried on by the University and had no separate legal constitution; it ran a printing and publishing business, a paper mill and had a branch in America. The Board took the view that the running of the Press was not a primary purpose of the University; reference was made to a statement in the Encyclopaedia Britannica that the Press is "to large extent a commercial firm, in which the University has a preponderating influence, governing it through a delegacy". (The University was not approached; it was thought that Oxford and Cambridge would not press for exemption under the Clause.)(b) In 1944 Sir Alan Barlow (at the instance of Sir David Ross) approached Cornelius Gregg about the incidence of E.P.T. on the Press. The question of a claim to charity relief was reviewed by the C.I. people but it was felt undesirable to invite such a claim because (a) the claim of the Cambridge University Press had been rejected by the Special Commissioners, (b) the wartime work of the Press was practically wholly ordinary Government printing (and thus outside its primary purpose). The E.P.T. question was settled by giving an increased E.P.T. standard. ([in handwriting] Sir Cornelius Gregg decided to take no action which might seem to invite a claim to relief on trading profits.)
3. In 1940 the Cambridge University Press claimed relief from Income Tax on its profits under Section 24, Finance Act, 1927. The Special Commissioners, in refusing the claim gave the following decision:-
"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 objects of the University. We find that the trade, except insofar 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."The reasoning behind this decision appears equally fatal to a claim by the O.U.P.
Incidentally the commission a decision on W.D.C. given by the War Damage Commission in 1942 is not quite in keeping with the Income Tax decision. The C.U.P. claimed charitable (2/3rds) relief from W.D.C. on the grounds that the proprietary interest in the premises of the Press was held for charitable purposes (charitable meaning, in this connection, "for the advancement of education, learning, science or research") and for such purposes only, and that they were the "used... for or in connection with the carrying out of the purposes for which that interest was held". The Board, on their Solicitor's advice, held that this relief was not due: but they were overruled by the War Damage Commission on appeal. But I do not think that the War Damage Commission's decision on different wording relating to a different tax should involve the reopening of what was in my view a correct decision of the Special Commissioners on Income Tax.
4. Since 1921 Cambridge University has obtained relief from schedule 8 tax on property owned and occupied by the Press - on the grounds that the property is occupied by the University, a charity. (This exemption runs irrespective of the use to which the premises are put.) So far as I can see the O.U.P. pays Schedule A tax on property owned and occupied; we have not such detailed information about the O.U.P. as about the C.U.P. but according to Sir David Ross (on P.S. 1496/44) it is merely a Department of the University, and on this basis Schedule A exemption would appear to be due. I will have this point examined further when the Chairman has seen the papers.
5. Further particulars are given in the C.I. (Claims) report below.