Freedom of the presses

New tax rules could put the squeeze on university publishers, pushing up the price of their wares

The biggest university presses are under the government's microscope before the introduction of new rules that could leave them with hefty tax bills and stop them being treated as charities.

Oxford University Press, Cambridge University Press and Manchester University Press are currently treated as charities by Revenue and Customs. But they are going to have to justify this, say guidelines to the Charities Act 2006, which comes into force early next year.

Previously, organisations that promoted education or religion were automatically given charitable status. That will no longer be the case, says Chris Kidgell of the Charity Commission. If the presses fail to demonstrate their benefit to the public, they could have to cough up hundreds of thousands of pounds - even millions - in corporation tax, capital gains tax and stamp duty. But the financial repercussions would be just the start of it.

David Rodgers, chief executive of Manchester University Press, says the dissemination of knowledge would suffer because publication prices would go up if university presses that do not pay tax now have to start, although he does not expect it to come to that. "For Manchester University Press, the implication would be that the prices of our publications would need to be increased - perhaps by up to 10% - so the academic institutions, scholars and students who buy them would pay more," he says. "Effectively this would mean fewer books being bought by the higher education sector, and a restriction in the dissemination of knowledge."

Robin Bloxsidge is publisher of the Liverpool University Press, which became a limited company in 2004 and is therefore not treated as a charity. Although his press will not be affected, he says taxing others would be "an attack on culture". "The more obscure titles might be more difficult to sustain," he says. "It seems a shame that the overall amount of tax that the chancellor would gain would be comparatively small, but the loss for the university presses would be large. University presses are publishing books that are different to commercial publishers. I think university presses are probably undervalued by the government. They play a substantial part in the way the government assesses researchers. Commercial publishers can't necessarily do that."

If university presses are taxed, what effect will it have on the universities that own them? A negligible one, insists Rodgers. "Manchester University Press is a not-for-profit organisation that aims to cover its operational costs and make a very modest surplus to allow for business development," he says.

But what of its giant rival, Oxford University Press, which had a turnover of £448 million and a profit of £65 million in the year to March 2006? The Bookseller magazine has estimated it would have to pay £19 million in corporation tax.

Andrew Malcolm, an OUP author and a former Oxford academic, thinks there would be little effect on Oxford University's finances if OUP were taxed. "I would say that, comparatively speaking, this would be little more than chickenfeed as far as the whole university is concerned."

The Charity Commission says it will work with any university press presently treated as a charity to discuss what they need to do to remain so, says Kidgell. So far, the presses appear confident that they will hold on to their tax exemption.

Stephen Bourne, chief executive of Cambridge University Press, says: "It may be worth noting that Britain is not the only jurisdiction to regard CUP's purposes and activities as being of public benefit. The press is accorded charitable recognition from Manhattan to Madrid to Melbourne." "CUP has no reason to be concerned," he adds. "Guidelines to the Charities Act 2006 remove the presumption that charities relieving poverty or advancing education benefit the public. The press recognises the legitimacy of expecting registered charities to demonstrate their public benefit bona fides. To the extent that the publishing and printing activities generate any surplus, they are applied to developing new work, to extending the global reach of the press, and to advancing scholarship."

Rodgers believes university presses may have to divide their businesses into separate charitable and non-charitable activities. "We are a department of Manchester University and have no separate corporate identity," he says. "Our responsibility is to help the university achieve its aims for the 'preservation, advancement and dissemination of knowledge'. We retain a commitment to the publication of the academic monograph, which has a small, highly specialised market and would not find an outlet with a commercial academic publisher."

OUP appears confident its exemption will not be revoked. A spokeswoman says: "OUP's UK tax exemption derives from the fact that it is a department of the University of Oxford, which is a charity. In the UK, OUP has no separate legal status distinct from the university. For as long as the university as a whole continues to meet the requirements of [the 2006 Charities] Act, the university - and therefore OUP - will continue to have charitable status."

But some academics are less sure. Malcolm says: "The assumption that university presses are charitable organisations because they are owned by universities is wrong. In 1978, the Inland Revenue granted OUP exemption from UK corporation tax, subject to certain conditions, the chief of which was that OUP must plough all of its surpluses (if any) back into non-commercial publishing and must not become a source of revenue for its university. It seems clear to me that, from 2008 onwards, OUP, or the vast bulk of its operations, is going to be subject - and rightly so - to UK taxation, just like other UK commercial publishers, educational and otherwise."

The Charity Commission's decisions will be the subject of much speculation. Not least around the stalls of the London Book Fair this week.

education.letters@guardian.co.uk

Comment by Andrew Malcolm

from: Andrew Malcolm, Akme Publications, 7 Southover Street, Brighton BN2 9UA

to: The Education Section Letters Editor, The Guardian, 119 Farringdon Road, London EC1R 3ER

17th April 2007

Dear Education Letters Editor,

The university presses' tax

I write concerning your article today Freedom of the Presses, in which dire warnings are issued of increased prices and reduced ranges of academic books if the university presses are subjected, as seems likely, to taxation under the new Charities Act. I do not follow the doom-mongers' logic.

A business is only taxed if it makes profits. Charities are supposed not to make profits, but to spend their surpluses on their charitable purposes. Neither general nor educational nor academic book-publishing (however these can be defined), is at present a charitable purpose recognized by the law. Whether or not the UPs can persuade the Charity Commissioners that their publishing provides 'public benefit', the new regime will at least oblige them to become not-for-profit operations which plough their surpluses back into non-commercial publishing. In other words, it ought to result in there being reduced prices and increased ranges of academic books.

The trouble stems, of course, from the fact that the two giants of the species OUP and CUP make huge and semi-huge profits but then do not operate as genuine not-for-profit publishers and plough them back. This was the condition imposed upon them by the Inland Revenue in 1978 and 1976 in return for tax-exemption, the condition which they ever more blatantly flout, with OUP now doing so exaggeratedly.

Thanks to its unpoliced dispensation of 1978, OUP has amassed the vast reserves with which it has since steadily bought out its tax-liable competitors to become, inevitably, the UK's largest independent publisher. In addition, it has lately spent £150 million on a refurbishment of the Bodleian Library, the foundation of a new chemistry faculty and the purchase of the Radcliffe Infirmary site, and still its reserves stand at over £250 million. Never mind the new 'public benefit' requirement, the correction of this monstrous anomaly is already thirty years overdue.

If all that Oxford money had been spent, as it properly should have been, on OUP's professed charitable purposes of educational and academic publishing, the country would now be knee-deep in free schoolbooks and affordable scholarly texts, the Oxford modern poets would not be scuffling in obscurity, and I would not have set out on my road to calvary and ended up writing letters like this one.

Yours sincerely, Andrew Malcolm

Late-breaking Reece shock: "tax unimportant, we'd simply covenant our profits." THE GATEKEEPER'S CREEP-OUT On 13th February 2007 extracts from a probing interview by Mukund Padmanabhan of OUP's Chief Executive Henry Reece were published in The Hindu newspaper, of Chennai (Madras), India. When quizzed about OUP's infamous poetry-axing of 1998, Reece stated: "We really don't have the people qualified to make judgments about contemporary poetry." (So much then for Oxford's Eng. Lit. Fac. - again). When tested on OUP's tax-exemption, he claimed: "It's not particularly financially important. It is more important as a statement of who we are (sic)." (In which case, who they are will presumably find no difficulty in paying all the back-tax they owe since 1978, renegotiating the numerous takeover deals they have concluded in the interim, and then handing over whatever's left of their £200+ million illegal reserves to a genuine charity - Oxfam perhaps). And when asked what will happen if/when OUP loses its tax-exemption, he asserted: "We would simply covenant our profits to the university." (Following the suggestion first mooted in the Fifth Appendix of The Remedy, but thirty years too late and totally blind, as always, to the fair trading issue.) As for Reece's fantastic "gatekeeper" guff (qv), I am reminded of an acquaintance who won a place to study at Oxford, but after a day-trip to the city turned it down. "Too many old gates," he explained. But apart from noting that the uncharitable writing is now clearly on the Walton Street wall, what Akme really wants to know is why on earth did all these extraordinary admissions, risible suggestions and ill-considered whims creep out on the quiet in an Indian newspaper published five thousand miles away? Was Reece shyly, slyly kite-flying, by any chance, retro-active pre-emptive like? Kite-flying, of course, is a sub-continental speciality, but in 2001 OUP came down to earth there with a bang. - A. M. Click now for the Akme version or the Hindu version (exits www.akme)

August 2007: JIG UP FOR DIFFERENT TOTAL ANIMALS? At last obtained by Akme: In all their glory, the granted applications by CUP (1975) and OUP (1977) for exemption from UK tax, including the Inland Revenue correspondence and featuring Papa Crass's fuzzy logic, Ooh we are so antiente and so verie spetiall, the Underliner's Case, Blessed be the Biblebaggers, Lord Trumpington Todd's CV, Oxford's Glowing Beams, Shining Torches and Great Latin Pœnis, and many other classic comedy hits, but not featuring their previous rejected applications (CUP 1940, OUP 1952), which they have, er, "recently lost". Click now for the CUP/OUP 1970s Charity Status Press Release and INDEX

December 2007: THE WHEEDLERS' WAR At last obtained and published by Akme: In all their shame, the failed applications by CUP (1940, 1941) and OUP (1944, 1950) for exemption from wartime taxes, featuring the Inland Revenue's rigorous investigations, the Special Commissioners' judgment (1940), the Oxford Vice-Chancellor's exaggeration, and both universities' unpatriotism. Click for the UPs' 1940s Charity Status Press Release, Explanation and Index

CHARITIES' PUBLIC BENEFIT CONSULTATION The deadline (6th June 2007) for submissions concerning the new 'public benefit' guidelines for charities has now passed. A final version of the guidelines will be published by the Charity Commission later this year (2007), and there will then follow a series of further consultations on four specific types of charity: charities for the relief of poverty, charities for the advancement of religion, charities for the advancement of education, and fee-charging charities, with university presses (along with private schools, the Oxbridge colleges and, indeed, universities) falling into the latter two categories. Stay tuned to www.akme for news of when these important sub-sector consultations are due to begin.