CUP's tax-exemption, 1976

extracts from
CAMBRIDGE UNIVERSITY PRESS 1584-1984
Chapters 13 & 14 (extracts) & 15 (complete)

by M.H. Black, University Publisher and Fellow of Clare Hall, Cambridge
Published by CUP, 1984, ISBN 0 521 26473 1

The page numbering of the orignal text in square brackets, forward.

CHAPTER 13: FROM 1945 TO 1972

[page 225] During the [Second World] War two important decisions were made. Faced with the accumulation of cash, Roberts [S. C., Secretary to Syndicate, 1922-48] persuaded the Syndicate [the committee of university dons responsible for CUP, equivalent to Oxford's 'Delegates'] to donate £49,000 to the University to found the Pitt Professorship of American History in 1944. It was in one way an imaginative gesture, good for the University's relationship with the USA, and it brought a succession of distinguished scholars to Cambridge to fill this visiting Chair; but the War was scarcely finished before Roberts's successors were groaning at the thought of how essential needs might have been met with that money.

The gift must have sprung from a strange kind of euphoria: Roberts knew of the constant and compelling need for an endowment fund from Wright and Waller; Chairmen of the Syndicate whom he admired, Such as Sir Hugh Anderson and J. F. Cameron, had repeatedly urged it on him; he knew it well enough from his own experience. The one advantage of the War was that it more or less enforced saving: and here was a very considerable sum almost lightly given away.

A year or two earlier, it had been suggested that the Press, as part of the University and, since 1916 and the end of the partnership, no longer subject to partial profit-taking by the Clays, ought to be exempt from income tax. This too was an important consideration. In truth, the Press had no outside source of funds. (The Government Almanac Annuity of £500 could hardly be considered significant.) Its printing and publishing, in good years, produced surpluses, though not large ones. These surpluses were the only source of new funds and reserves: if they were depleted by tax, the future security of the whole operation was to that extent put in question. But in 1940 - as those who were alive then will remember - it was a patriotic duty to give to the war effort: rich people would present a whole warplane to the nation, and poor people would buy a few bullets for its machine guns. It is understandable that the Syndicate, meeting resistance from the authorities, were unwilling to press the case; it was less understandable that the case was allowed to rest for over thirty years, at the end of which relief from corporation tax (as it had become) was an urgent necessity.

Those, one can now say, were mistaken judgements...

[page 226] At the beginning of the 1950s, the Press as publisher produced about 130 books a year, nearly all of them printed at Cambridge. This figure had varied little since early in the century, but the quality of the backlist had produced a steady growth of turnover. In 1936, 38% of this was exported. That percentage dropped during the Second World War, but in 1947 returned to the [page 227] pre-war figure. In 1951 exports passed 50%, and in 1962 60%. The number of titles published grew slowly; after the war-time decline it returned to 100 in 1946, and stood at about 130 throughout the 1950s; but the numbers of copies printed of each book began to rise as governments throughout the world devoted more funds to education. There was therefore a substantial growth beginning, and it was export-led.

The 1950s saw the foundation of new universities and other centres of tertiary education, in both the developed and the developing countries. It was said that at one time during this period a major library was opening every week in the USA, and, as in the War, it became easy for academic publishers to sell their books: print-runs grew, and reprints followed. Future economic historians of the book trade will be able to demonstrate that never since Gutenberg, had edition-sizes of learned and academic books been so large, or the market so receptive. It was a golden age, in which, as Shakespeare said, people 'fleeted their time carelessly'. There seemed no reason why it should not last for ever. But it imposed severe strains on cash management while it lasted; it was marked throughout by inflation, at first slow and then frighteningly fast; it lasted only about twelve years; and was followed by a recession which lasted longer and increased the strains many times over.

The period was also marked by a number of publishing successes. The most important was the publication of the New English Bible

...

The result was that [page 238] by 1969 the Press's cash resources had been totally depleted, and a large overdraft had begun to grow which was alarming the Press Syndicate, the University Financial Board, and Barclays Bank.

Clearly, drastic action was needed, but the management structure which David [R. W., Secretary to Syndicate, then Publisher 1970-74] had inherited had weaknesses which made clear-cut action difficult. It was not simply that a rather 'scholarly' mode of management was having to grapple with a large-scale business crisis. Changes in the scale and location of Press operations in the sixties had exacerbated the problems of structure and location already mentioned, accentuating the centrifugal tendencies of the different segments of the business and placing strains on the executive structure.

This structure was geographically rather than functionally based. This fostered the tendency towards polarisation, prevented unified and focal decision-making, and encouraged a departmental approach. The current economic problems promoted a proliferation of committees, discussions and paper-work, and hindered real decision-making and indeed even a full appreciation of the seriousness of the business situation although David himself was well aware of it. The Press Syndicate, uncomfortably conscious of the financial problems, but lacking the business experience to resolve them, themselves asked for more and more information and documentation, putting even more pressure on management.

At this stage, in 1969, David rightly decided that it was no longer possible for one man to be simultaneously both Secretary of the Press Syndicate (i.e. the Syndicate's chief coordination officer) and also head of the publishing business. Steps taken five years previously to improve the coordination of the printing and publishing businesses, for example by instituting joint committees, had not proved successful. There were crises from time to time, and some mutual lack of confidence. David felt that a University Printer might more easily accept the control of a chief officer who was not at the same time the head of the Press's other business; also that the Press's operations had grown so much in scale and complexity that each role had become a full-time job. The Press Syndicate concurred. Early in 1970 David withdrew [page 239] from the post of Secretary of the Syndicate to be full-time head of the publishing business, with the new title of University Publisher. The two businesses were officially decentralised and put onto an 'arm's-length' business relationship with each other. The post of Secretary of the Press Syndicate was passed, for the sake of continuity, to the University Treasurer, Trevor Gardner, who in that position was to play a very important role in the next two years; and the Press ceased for the moment to have a chief coordinating officer at the head of its executive staff.

...

In the meantime, anxiety about the Press's financial position had been steadily growing, as the overdraft borrowings mounted. The Statutes and Ordinances of the University require that each year the Financial Board appoints one or more (usually two) of its members as representatives to examine the Annual Accounts of the University Press, and to confer with the Press's Auditors, who are appointed by the Board. The representatives discuss the Accounts in detail with the senior executives of the Press, and then make a report. The representatives appointed to consider the 1969 Accounts were John Bradfield (Bursar of Trinity) and Christopher Johnson (later Bursar of St John's). Two of the [page 240] most able financial men in the University, they saw at this relatively early stage what was going wrong. They commented:

The figures show that the profitability is seriously inadequate. This is the more disappointing because the efforts of the Press to increase gross profit have met with some success, but rapidly increasing overhead expenses have largely offset this improvement. It was very clear to us that publishing businesses are particularly prone to suffer from the effects of inflation because of the deferment of their profits and the high overhead element in the profit and loss account.

They concluded that the Press needed to make a profit of at least 5% of sales to plough back into the business. Their argument ran as follows:

1. A commercial publishing and printing business has the simple aim of maximising profit.
2. This is inappropriate to the Press because of its duty to publish scholarly works, and to do a great deal of printing for its owner, the University.
3. But there must be some kind of aim to serve as a guide over the attitude to be taken to worthy but unprofitable proposals, and over the pricing of sales where there is little or no direct commercial comparison.
4. An aim of 5% for ploughing back seems minimal having regard to the considerable needs of the Press itself for new finance, the fact that the University is unlikely to be able to provide further capital, the difficulty of long-term funding from non-University sources, and the extent to which bank accommodation has already been used.

Once again, it was one thing to diagnose the situation; quite another to rectify it. Anxiety about the Press's financial position continued to mount.

A Syndicate Minute of 17 February 1970 referred to the constant exceeding of overdraft limits, and another of 9 October 1970, commenting on the 1969 Press Annual Accounts, read:

[page 241] The Syndicate expressed concern at the inadequacy of the net income, and in particular at the amount of the income that had been paid out as interest on borrowings. The continued increase of these borrowings also gave a cause of anxiety.

It was pointed out in the same Minute that in 1969 the bank had financed 25% of the Press's total assets but had taken 51% of the Press's total income in overdraft interest.

In 1970, the position deteriorated further. The year-end overdraft, usually by no means the annual peak, increased by another £256,000, and was equivalent to nearly 20% of annual sales, but overdraft was rising faster than sales. It was already within £16,000 of the upper limit fixed by the Financial Board. The official report accompanying the 1970 Annual Accounts said:

It must be remembered that, on each of the last three occasions of the annual meeting with the Bank the Manager has asked for some assurances that the Press is taking steps to reduce its dependancy upon the Bank. In good faith, these assurances have been given but not kept. On these figures, and with the knowledge of what has happened during 1971, it is apparent that at the next meeting in April 1972 the Press is going to ask for an increased borrowing limit, which may also exceed that at present imposed by the Financial Board of the University... Should the Bank, or the Financial Board, refuse this increase, the Press could find itself in a most embarrassing position. Unless urgent steps are taken to rectify the position either by an improvement in profit margins providing an increasing proportion of new money from that source, or by pruning some aspects of the publishing activity, a very critical situation is bound to arise.

Still struggling. The loss on Syndics' books is alarming. A substantial turn-round in U.K. profitability is urgently needed. The heavy overdraft situation, combined with the low level of profitability on the publishing side, creates a problem of much anxiety.

...

[page 242] At this dark moment the Press had a great stroke of good fortune, and one key element necessary to its recovery fell into place. Lord Todd of Trumpington, Master of Christ's College and Nobel Laureate, became Chairman of the Press Syndicate...

...

[page 244] The second key element necessary to the recovery of the Press was about to fall into place. There was now a strong Chairman. What was needed in addition was a strong chief executive officer. A happy combination of circumstances led to the availability at that very moment of Geoffrey Cass, who had been Managing Director of the Publishers George Allen and Unwin Ltd. A graduate of Jesus College, Oxford, Cass had successfully reorganised the London office of the Press, as a management consultant with Personnel Administration Ltd in the early sixties, while David was London Manager; and Cass and David had enjoyed working together. An article in The Times about Cass gave David and Todd the same idea simultaneously.

The Press approached Cass, and the challenge appealed to him. Todd, David and Gardner negotiated with him, and on 21 December 1971 Geoffrey Cass joined Cambridge University Press, taking office as Managing Director of the publishing business on 1 January 1972. His brief was to rescue and revive an ailing organisation.

...

CHAPTER 14: RECOVERY 1972-4

... [page 249] It is clear that, coming to the Press from a commercial firm, and seeing it with fresh eyes, Cass was struck by its unique nature. That perception [page 250] made him want to make its nature clear and to strengthen it, not to turn it into an imitation of the kind of general publisher he had just left.

His analysis of the Press's pricing policy convinced him that the prices of the backlist titles had not kept pace with inflation, and that this had seriously undermined the income side of the Press's financial balance. He initiated a programme of repricing the thousands of titles in the backlist. There was some opposition now and later to this measure, which he met by restating the analysis of the effects of inflation on products with a long 'shelf life' before sale. Cars, for instance, are produced for sale in a relatively short time-period; virtually all costs and income actually accrue within that period, and those costs, prices, and income necessarily reflect the current value of money. A university press incurs all of the year's costs at the current value of money, but three-quarters of its annual income comes from prices fixed in earlier years before inflation had reduced their real value. Those who could not understand why a price fixed on the basis of known costs, ten years ago, should now be changed upwards were well answered by being asked whether any sensible person would sell his house at the price he had paid for it when it was newly-built twenty-five years earlier; that price would be reasonable only if there had been no inflation since. One sells one's house at the current price, not the historic price, in order to be able to buy another. Current book prices had to reflect replacement costs, not original costs.

The Minutes of a 1972 management meeting make Cass's philosophy clear:

We need not feel ashamed of strategic entrepreneurial measures to make ourselves more viable. We need not be faint-hearted in defending our new policies. We have a higher proportion of books in our list, that would never normally see the light of day in a commercial press, than any other university press. If we are to continue to produce economically marginal books because they are academically desirable, then we must have money to be able to do that. We are not interested in maximising profits; we have no proprietors, no shareholders, we pay no dividends. There is no-one into whose pockets money pours if we increase our prices. All our measures will be aimed only at securing our ability to continue to be a genuine, effective, viable university press. Our defence against criticisms is total.

[page 251] These thoughts show how Cass's mind was moving. It struck him as soon as he entered the Press that it was undoubtedly a charitable institution. He frequently reminded the Syndicate and his colleagues of the integrity of the Press's funds, the total ploughing-back of surpluses without any external distribution of earnings, the absence of private monetary interests, the clearly charitable objectives, the complete controlling ownership of the University of Cambridge, and the gratuitous professional control exercised by the (unpaid) Press Syndicate. His official Report to the Press Syndicate on the Press's 1972 Annual Accounts is evidence of the way in which his ideas had crystallised:

It cannot be emphasized too often that the aim of the Press is not to make profits. Our overriding objective is to publish works of scholarship and education because they make a worthwhile contribution to human knowledge. The goals of a university press are vitally different from those of commercial presses. However, all our efforts in 1972 have been devoted to ensuring that the Press is at least as efficient as any commercial press, and that it produces enough funds to safeguard its continuing ability to discharge its duties to the University and to scholarship.

Another indication of his views on the status of the Press was his early abandonment in the accounts of the Press of 'profit' and 'profit-accounting', as inappropriate and positively misleading, both internally and in the outside world. The University Press existed to disseminate knowledge, not to make money, and certainly not to produce 'profit on turnover' or 'return on capital'. The Press's capital was not a financial investment but the means of achieving the diffusion of scholarship and education. The operations of the Press were the Press's purpose; they were not the means to some financial purpose. The Press was a trust governed by the Chancellor, Masters, and Scholars of the University of Cambridge. It merely had to remain financially viable in order to discharge altruistic operational objectives: and of course it had to ensure its viability in the future. This way of thinking was endorsed by the Financial Board. Its representatives, after examining the 1972 Press Accounts, and urging further fund-generation, explained:

We do not suggest that profits be pursued for their own sake as in a purely commercial undertaking. The case is rather that only a sound financial basis [page 252] will permit the continuance of a conscious policy of giving help where help is most needed to ensure that works of merit in scholarship are made available to the world.

...

[page 258] It is interesting at this point to reflect how effective had been the role of the Financial Board in helping the University Press out of its crisis. By Statute and Ordinance, the Press Syndicate has total control over the running of the Press, and the University in effect treats the Press as a trust, with a distinct identity, operating within the University. But the University has always preserved its sovereignty by retaining ultimate powers to control the Press's borrowing, and as a last resort to dismiss the members of the Press Syndicate, whom of course it also appoints. It is an excellent system for allowing a major business (if an altruistic one) to operate successfully within a great and ancient university. It works by exception. While the Press runs successfully, the ultimate powers lie dormant: but if the Press runs into financial trouble, Press borrowing rises, and the University Financial Board's powers to limit borrowing are activated. Controlling the purse-strings of debt gives the Financial Board even greater powers, since it is in a position to insist on other measures as the price for credit - as it did in 1972. Since the Board reviews the Press's Annual Accounts each year, and since the Board's chief officer, the University Treasurer, is ex officio a member of the Press Syndicate, the Financial Board is in a good position to see financial trouble begin to arise and to comment on it - as it did in the early seventies.

Towards the end of 1972, Geoffrey Cass had finalised his proposals for a new publishing management structure, and for new appointments from outside the Press; and he presented them to the Finance Committee. He proposed

...to get away from the geographically determined structure which had led to the artificial division of operations between Cambridge and London, and had inevitably produced a serious degree of polarization and tension

[page 259] and he intended to give

...more managerial power and responsibility to the acquisitions editor... and to restore the individual book to the centrally important unifying role which was the dynamic theme and focus of most successful publishing houses. The broken-up, departmentalized approach killed initiative, enthusiasm, and decision-making. The mainsprings of publishing were manuscripts and books and the excitement surrounding them - not methods, and procedures, and departmental committees.

He had found that decision-making concerning the individual book tended to be dispersed departmentally. He believed that most large publishing houses were over-administered and over-departmentalised, particularly in the USA, resulting in the blunting and neglect of the entrepreneurial drive which created vital publishing houses in the first place - the interest of individuals in the whole process of bringing particular types of books to the market. The personal involvement and commitment of an acquisitions editor over the lifetime of a book were essential - and particularly so in a university press.

The 'global' administrative approach to publishing was rarely successful. Cass believed that publishing success sprang from taking right decisions at the 'micro' level, in respect of each individual book. If entrepreneurial decisions at the 'micro' level were correct, business success at the 'macro' level was far more likely to follow. However, it was vital that decision-making should be consistent and resolute over the whole range of the Press's publishing.

...

CHAPTER 15. CHARITABLE STATUS RECOGNISED

[page 265] ATTENTION could now be given to major strategic considerations which hitherto had had to take second place. The Press had been restored to financial health, its management had been restructured, with new talent recruited from outside, and its operational plans for the immediate future had been determined. Cass now began to consider the taxation status of the Press. It had always been clear to him that the Press was operating as a charitable trust, and that it satisfied all the requirements for tax exemption - yet it was subject to Corporation Tax. In one sense this was very surprising: yet, in another, it was not, for he had quickly discovered not only that people outside Cambridge were largely ignorant of the nature, constitution and ownership of the Press, but also that members of the University and even of the Press itself knew less than they should about its history and nature. Indeed, during the 1971/2 crisis he had been hard put to find many people, either inside or outside, who realised that the Press was an altruistic national educational institution which was worth saving. Ironically, the fact that Cambridge, unlike Oxford, had restricted itself rigorously to scholarly and educational publishing seemed to have contributed to the general ignorance about the philanthropic nature of its activities. Inside the Press, he had found a curious ambivalence of attitude, even among some of the more senior officers. On the one hand they knew that there was something 'special' about the Press, but on the other they wanted to be regarded as the equivalent in effectiveness and vigour of any general publisher. That in itself was reasonable; what was unreasonable was that they seemed to fear that charitable status would somehow be seen as 'unbusinesslike', or that [page 266] it would be taken by others as giving the Press an unfair advantage.

Cass thought this view was illogical, and deprived the Press of its rights. Cambridge University Press was indeed virtually unique, but that uniqueness should be its strength. In his view, the Press was entitled to freedom from tax, and had been paying tax needlessly, at least since 1916 when the partnership had ended. Statutory provisions had been specifically provided by Parliament for the exemption from tax of the trading of charitable organisations, for good reasons based on the special nature of charities. Charitable privileges were not something to be ashamed of, or sensitive about. A charitable organisation was entitled to tax exemption, provided that its trading satisfied the strict provisions of the law. Cass examined the various reasons advanced for not seeking tax exemption and regarded none of them as valid, and most of them as pusillanimous. It had been variously argued that there might have to be legal proceedings which would draw unfavourable attention to the Press or to the University; that tax exemption would be bad for the standing of the Press (and its officers) in the printing and publishing trades, and that this would damage relations with other organisations; that charitable status would limit the Press's field of activity; that seeking tax exemption might endanger the University's funding from the government and be a threat to the University's own tax immunity; and, finally, that the Press had tried to secure exemption from tax in 1940, had failed, and therefore hadn't a case. All these reasons had been voiced at one time or another in Press Syndicate meetings, and there was evidence that similar gloomy views had been expressed at Oxford in respect of Oxford University Press.

Over the years since the war, scarcely anyone had actively supported the idea of positive action, one of the few exceptions being Trevor Gardner. The Press's professional advisers tended to favour the idea, but no one had taken any purposeful steps. Lord Todd proved to be another ally, and he supported Cass's determination to obtain freedom from tax for the Press. As a preliminary investigation preceding possible new copyright legislation, the Whitford Committee on Copyright had sought [page 267] submissions from publishers. The Press had a special interest in the matter because of its privileged position under the Letters Patent as Bible publisher, and in 1974 Cass submitted to the Committee a detailed statement which necessarily rested on an analysis of the constitution, the nature, and the history of the Press - the essential core of the earlier chapters of this book, and starting from the Letters Patent of King Henry VIII granted in 1634. That analysis also proved to be the starting point of the more fundamental analysis which occupied Cass for a significant part of 1975.

On 25 October 1974, he got the Press Syndicate's authority to challenge the 1972 Corporation Tax Assessment on the Press, and to contest the decision made in 1940 by the Special Commissioners of the Inland Revenue. On 29 October 1974, he informed the Vice-Chancellor of this move, as a preliminary to possible litigation. In this way the Press embarked on the final step in the clarification of its nature and status: resolving the last anomaly which had remained undisturbed since 1916, and which had been lived with for so long that it had come to seem natural. That dangerous complacency was now dispelled.

Examination of the 1940 case showed that the Special Commissioners had denied the claim for exemption on the ground that, since the Press was printing and publishing for the outside world and not simply for the internal use of the University, the Press's trade went beyond the purpose and objects of the University and (in terms of the Act) was not exercised in the course of the actual carrying out of a primary purpose of the University; though the Commissioners conceded that the publishing so conducted was 'specialized and devoted to the production of works of learning'.

The decision was evidently based on a set of misconceptions, and readers of this history are in a position to wonder how a University activity, devoted to the advancement of learning and religion, first instigated and then continuously controlled by the University for nearly four hundred years, in accordance with the Letters Patent granted in 1534 at the University's own request, could fail to be within the purpose and objects of the University. Furthermore, the whole history of Cambridge since [page 268] the Commissions of the nineteenth century was of a body which in science and the humanities served the cause of research and learning, which is not domestic but international. The old formula, 'education, religion, learning and research', necessarily carried a missionary implication in schools, in parishes, in other universities, in libraries, in research establishments; and books and journals were the primary communications which supplemented and made permanent the spoken word of teaching. Moreover, the Press had from its earliest times recognised as a prime function the general publication of learned works which commercial publishers would not undertake.

However, there is some excuse for the Special Commissioners' classic misjudgement. In 1940 the case had been presented halfheartedly, with little in the way of supporting evidence or constructive argument, and with virtually no reference to the long history of the Press, to its charters, or to relevant legal decisions registered in the Press's favour over the centuries. The Press was advised by Counsel in 1940 to appeal against the decision, but did not, partly for the patriotic reasons mentioned earlier, and partly because the Press did not wish to appear to be 'claiming an unfair advantage' over other publishing houses during the war.

Cass could only see the 1940 case as a false start, too easily discouraged. Clearly, the definition of the University's purposes which was implied in the Commissioners' decision was wrong and it would be relatively easy to prove that. The Commissioners had not been made sufficiently aware of the Press's history, which was itself the best way of showing how it had reached a status which should give it exemption.

Exemption from Corporation Tax is available under the Income and Corporation Taxes Act for the profits arising from any trade carried on by a charity, provided that the profits are solely applied to the purposes of the charity and provided that the trade is exercised in the course of the actual carrying out of a primary purpose of the charity. For the purposes of the Act, a 'charity' means any body of persons or any trust established for charitable purposes only. Cass's initial analysis, made between 1972 and 1974, had identified in his own mind several features of the [page 269] Press's constitution and operations which brought it within the ambit of the Act.

First, it was wholly owned by, and an integral part of, the University of Cambridge - itself a charity. The Press was established and governed under the Statutes and Ordinances of the University.

Second, from the constitutional and legal point of view the press itself had no separate corporate status, apart from 'the Chancellor, Masters, and Scholars of the University of Cambridge. 'Cambridge University Press' was therefore simply the style under which the University of Cambridge printed and published.

Third, the University of Cambridge had carried on the trade of printing and publishing for nearly four hundred years, and there had been an unbroken succession of University Printers since 1534. The Press was, so far as could be ascertained, the oldest press in the world.

Fourth, the governing body of the Press - the Press Syndicate - was quite unlike any board of directors in ordinary commercial life. It was appointed by, and dismissible by, the Council of the Senate of the University. The members of the Press Syndicate were unpaid; they governed the Press as representatives of the Chancellor, Masters, and Scholars of the University, and had done so since 1698. Before that, the Press had been directly governed by the Vice-Chancellor and the College Heads. Members of the Syndicate had no private financial interest in the Press, and represented the ultimate in gratuitous professional control. They were Masters of Cambridge Colleges, Professors and senior academics of the University. As at all meetings of important University committees and Syndicates, at meeting's of the Press Syndicate academic gowns were worn both by members of the Syndicate and by the executive officers of the Press to signify that they were conducting the University's business. The Vice-Chancellor of the University, or his Deputy, chaired the Press Syndicate, and the University Treasurer was also a member of the Syndicate, ex officio.

Fifth, every publication of the Press had to be individually presented to and approved by the Press Syndicate on behalf of the [page 270] University before it could be printed and published. This was no mere formality, since the appraisal was academically rigorous. The process was the modern equivalent of approval by the Vice-Chancellor and three doctors, required in 1534. The officers of the Press had power to reject publications, but they had no power to accept them.

Sixth, publication by the Press Syndicate was approved on the ground of the contribution which the Syndicate judged that publication would make to the advancement of knowledge, education, or religion. It followed that the publications of the Press were exclusively scholarly, educational, or religious. The Press complemented and extended the research and teaching activities of the University by making available world-wide, through its printing and publishing, an extensive range of academic and educational books, learned journals, Bibles and prayer books, and examination papers. On this analysis, the objectives of the Press were patently charitable. 'Profit' as such was not considered or required by the Syndicate. They were concerned only with the viability of the Press, now and in the future, as the condition of its ability to continue to pursue its scholarly objectives.

Seventh, the Press had since 1916 had no partners, shareholders or investors who stood to gain financially from its operations. All funds held by the Press, all funds received by it, and all funds generated by it, were ploughed back into further scholarly, educational, and religious publishing. There could not now be any distribution of profit or assets to any persons or bodies of persons: therefore no commercial motive or motive of private pecuniary gain intruded. Moreover, the Press's integrity was fully protected by its constitutional status. It could not be bought or taken over.

Eighth, even the University itself now made no call on the Press's funds, though any such call would itself have been charitable. The last significant contribution of the Press to the University had been the foundation of the Pitt Professorship in 1944, and that obviously charitable gesture had been on its own initiative. The printing and publishing activity of the Press was its prime purpose. That activity was not carried out to secure [page 271] 'profit' or funds, even for some other charitable purpose - not even to secure funds for the parent University. The University chose to perpetuate and finance the charitable printing and publishing activity out of the funds raised from that activity. In effect, these were wholly at the service of the world-wide academic and educational community for the dissemination of knowledge and religion through the printed word.

Ninth, the Press was self-financing. Apart from the historic and by now merely symbolic annual grant of Ł500, it received no government income or regular grants or subsidies of any sort. It had to generate its own funds in order to pursue its objectives. The Press's activities were entirely for public benefit, but it was not a drain on public funds.

Tenth, the American Branch of the Press was in fact exempt from all US taxes.

On all these grounds, Geoffrey Cass felt convinced that the University Press could only be considered a self-financing charitable trust, established and controlled by, and existing within, another charity - the University of Cambridge - but with a distinct self-contained identity and financial integrity of its own. The Press's own objectives were clearly charitable, and its activities also directly fulfilled the University's wider primary purposes, and had been recognised to be doing so for centuries. The Press; charitable in itself, and also part of a greater charity, seemed nonetheless to lie in a curious no-man's-land. Though an integral part of the University, it was treated as a separate entity, as a 'company', by the Inland Revenue for taxation purposes. The 1940 claim had failed, unreasonably, on the judgement whether the activities of the Press were carrying out a primary purpose of the University, not whether the activities themselves were intrinsically charitable or were in pursuit of a primary charitable purpose. The judgement had taken a very narrow view of the University's own purposes. But the absurdity was that the Commissioners' views had the effect (within the law) of rendering the Press's relationship to the University an actual handicap; for the Press's own primary purpose was charitable, and its activities carried out that primary purpose. In other words, the Press, viewed alone, qualified for exemption even [page 272] in 1940. Much of course depended on exactly what case the Inland Revenue was asked to consider. Cass suspected that, because of the particular way in which the exemption clauses were framed in the legislation, the Press's 1940 appeal against tax might have been attempting the more difficult of what he saw as two possible routes to the deserved exemption - more difficult because there was no formal statutory definition of the University's purposes.

To check his own opinions about the Press's position, Cass took preliminary advice from the Press's solicitors, who made helpful suggestions. They too believed that the Press had a strong case, and they had discussed the issue with the Press's auditors, who also thought the Press should contest its tax status. Cass then retired to the University Archives for weeks, where he worked both on the Press's history and on key material relevant to a study of the University's own objectives. The product of his research was a submission to the Inland Revenue. It described itself as a 'preliminary statement' rather than a formal submission of the Press's case; nonetheless it was a fairly massive document. The District Inspector of Taxes, who was the initial addressee, must have quailed a little when he received some sixty typewritten pages, dated 21 November 1975, and a little more when he read, at the end of Geoffrey Cass's letter:

This letter is not our formal submission: but there seems to me no reason nevertheless why it could not provide a basis for an Inland Revenue decision to exempt the Press, at this stage. Our formal submission, when completed in the Spring, is likely to be several hundred times bigger than this letter. Yet the complete dossier of evidence and historical documents will, in the main, merely reinforce each of the key points of this letter a hundred times over. I have extracted for this letter the crucial items which would determine the case.

As that extract suggests, the submission took the form of a detailed legal and historical argument in which the nature of the Press's activity was analysed both as something given from the very beginning and as something which had evolved. In essence the historical account was a summary of the archival material now used in the early chapters of this book, and it [page 273] quoted crucial documents, such as the charters, and the comments of contemporary observers. The legal argument was designed to provide a completely new approach to the crux of the 1940 case, which was whether the Press's trade was exercised in the course of the actual carrying out of a primary purpose of the University.

Cass set out to advance two main theses. The first was concerned with this crux, considered the University itself, and was divided into two arguments. The first of these was that the activities of printing and publishing scholarly and religious work for markets outside Cambridge were, de facto, a primary purpose of the University of Cambridge, because the University had as a matter of historical fact pursued such activities for nearly four hundred years, on royal authority, confirmed at various times during the four centuries by legal decisions at the highest levels. The second argument was that the trade of printing and publishing scholarly and religious works was exercised in the course of carrying out the University's wider primary purposes: the advancement of education, religion, learning and research, including the dissemination and diffusion of knowledge beyond the confines of the University itself. Those purposes could not be confined to what happened 'within the walls' of Cambridge, and never had been. The general dissemination of knowledge was a necessary part of the advancement of education and learning.

The second main thesis broke away from the ground of the 1940 case altogether, and considered the Press by itself: this particular argument did not rely on relating the activities of the Press to a primary purpose of the University. It contended that the primary purposes of the University Press itself in respect of its printing and publishing, quite apart from the Press's connection with the University, were themselves wholly charitable. They fell within the second head (the advancement of education and learning), the third head (the advancement of religion) and probably the fourth head (other purposes for the benefit of the community) of the recognised charitable purposes established by the preamble to the Charitable Uses Act of 1601 as re-stated by Lord Macnaghten in Pemsel's Case (1891). The Press was clearly established 'for charitable purposes only', and therefore already qualified for charitable status. It was entitled to tax [page 274] exemption in its own right. Furthermore, if the Press had had corporate status distinct from the University it could without difficulty have obtained independent registration as a charity. If it had been a separate charity, the question whether it was carrying out a primary purpose of the University would not have been an issue. It would however be absurd for part of an existing charity to have to seek separate charitable registration solely in order to secure tax exemption for patently charitable activities which were in any case prime purposes of its parent charity which itself qualified as a charity under the same charitable heads.

The submission had three main sections: one consisted of evidence and argument bearing on the history and role of printing and publishing within the University and on the objectives of the Press throughout that history; the second comprised evidence and argument about the objectives of the University of Cambridge; the third outlined the key features of the Press's constitution and operations. Other sections cited relevant legal judgements in support of the Press's case, outlined the differences between the Press and other publishers, analysed the physical output of Cambridge University Press, compared the tax status of its overseas branches, and drew final conclusions. The whole was supported by evidence and quotation from the historical record.

Cass assembled a dossier of items of evidence from royal, legal, constitutional, parliamentary, and University documentary sources. The historical analysis naturally began with the royal charters: the Letters Patent of 1534, and the later grant of 1628. Of the first Cass said:

...it was never envisaged for a moment by either the University or the King that the University's publishing and printing was only for the 'internal use of the University'. The Royal Charter specifically referred to... books being sold 'as well in the same University as elsewhere in our realm, wherever they please'. Furthermore, the University's Stationers and Printers could only print books ('omnimodos libros' - 'all manner of books') that had been approved by the Chancellor of the University or his Vice-Chancellor and three doctors. In relation to the question of establishing whether printing and publishing works of learning for use outside the University is a prime purpose of the University, and whether dissemination of knowledge by [page 275] printing and publishing works of learning is in general a prime purpose of the University, it would be impossible to find more compelling evidence than this Royal Charter speaking to us across 441 years of history. It is an authority which has been effective since what the lawyers refer to as 'time out of mind'. If this is not an incontestable establishment of a prime purpose, it makes nonsense of the concept. There is, however, no doubt at all historically what view the Courts - from the House of Lords downwards - have taken of this Royal Charter over the last four and a half centuries.

He went on to point out that when, on 6 February 1628, Charles I had granted further Letters Patent to the University under the Great Seal of England, it was 'to advance learning and end all controversies'. The King had 'ratified and confirmed unto the Chancellor, Masters, and Scholars of the University of Cambridge, all and every of the Privileges and Immunities by the said Letters Patent of 20th July 1534 Henry VIII to them granted'. These Letters Patent contained a significant amplification, empowering the University's stationers and printers to sell their books 'as well within the said University as elsewhere within any of his Majesty's Dominions'. The clear statement that the issue was concerned with the advancement of learning was linked to a direct indication that the output of University printing and publishing was not confined within the walls of Cambridge.

Naturally, the submission quoted the important comment of William Dillingham, who introduced the word 'trust' into the whole discussion:

The University'es priviledge is looked upon as a trust for the public good...

Another crucial quotation used the words of Mr Justice Foster of the King's Bench, writing in 1755 (p. 109):

...we consider the Powers given by the Letters Patent as a trust reposed in [the University], for public Benefit, for the Advancement of Literature. ...I hope both the Universities will always consider the royal Grants in that light.

Cass also quoted James I, who in confirming Henry VIII's Letters Patent (which had been ratified and confirmed by Elizabeth) accepted

...this policy of our ancestors as being both salutary for the commonwealth and favourable for the advancement of knowledge.

Another source was the Almanac Duty Act of 1781. Referring to the use made by the University of this money (then a [page 276] substantial sum) in printing and publishing, the Act of Parliament read:

AND WHEREAS the money so received by them has been laid out and expended in promoting different branches of Literature and Science, to the great Increase of Religion and Learning, and the general Benefit and Advantage of these Realmes....

The reader will remember that the charitable nature of the Press had been stressed at the opening of the Pitt Building. Cass also quoted the speeches made at the earlier laying of the foundation stone: for instance, Lord Camden, reflecting on the future of the building, had said that he trusted

...that it will be the means of diffusing more generally the knowledge which the Press of Cambridge University has hitherto been so pre-eminent in doing... [and that]... the knowledge diffused will be planted on the foundations of true religion, and of all those sciences for which this University has long been so distinguished.

The 'public interest' was also in the mind of Lord Eldon, the Lord Chancellor, in 1802 when he gave judgement in favour of the University in its dispute with the then Royal Printers about the printing of the Bible. After considering the construction put by Courts of Law upon the Letters Patent of 1534, he concluded:

my opinion is that the public interest may be looked to upon a subject, the communication of which to the public in an authentic shape, if a matter of right, is also a matter of duty in the Crown, which are commensurate. The principle of the law is that this duty and this right are better executed and protected by a publication of Books of this species in England, by persons confided in by Letters Patent under the Great Seal of England.

It was a necessary part of the Press's submission that the dissemination of knowledge beyond Cambridge itself had always been one of the University's purposes. It was evident that the creation and advancement of knowledge and then the transmission of it merely to a select few would be self-defeating. Cass quoted President Butler, of Columbia University, in his 1917-18 Report :

A university has three functions to perform. It is to conserve knowledge; to advance knowledge; and to disseminate knowledge. It falls short of the full realization of its aim unless, having provided for the conservation and advancement of knowledge, it makes provision for its dissemination as well.

[page 277] He went on to quote the words of Dr. A. W. Ward, later Sir Adolphus Ward, Master of Peterhouse, editor of the Cambridge Modern History and the Cambridge History of English Literature, Syndic of the Press and Vice-Chancellor's Deputy as Chairman of the Syndicate, in his speech at the end of his term of office as Vice-Chancellor of Cambridge University on 1 October 1902:

The researches and studies single-mindedly pursued inside and outside our laboratories and libraries by resident members of this University and by students and scholars whom this University has trained form the chief motive element in its intellectual life and the most potent factor of its national and international significance. Nor have I any hesitation in adding my belief that the University Press, as a main agent in making the results of these researches and studies known within and beyond our local limits, will in future become of more importance than ever as an organic branch of our academical activities.

Two years later, in 1904, Ward had inevitably taken part in the formal discussion in the Senate House of the Report of the Syndicate on the future of the partnership with the Clays. Speaking now as representative of the Syndicate, he came naturally to the theme of 'the advancement of learning' as part of the topic of discussion, namely,

the management of one of the most important of the agencies which [the University] has at its command for this very purpose.

Ward went on to say that there was one thing 'which for my part I consider fundamental - that it is the duty of the University to utilise the Press for the publication of contributions, as such, to the advancement of science and learning'. And he referred to the University Press as directly affecting 'some of the highest and widest of the purposes which the University desires to serve'.

Cass also quoted the University's own view of the charitable nature of the University Press's activities, as made clear in a Joint Memorandum submitted to the Secretary of State by the University of Cambridge and the University of Oxford in 1911. The Joint Memorandum referred to 'the benefits arising to education and learning through the agency of the University Presses', adding:

[page 278] The Universities have built up great organisations for the production and sale, not only of [Bibles and prayer books] but of books that promote the general cause of education and learning...
...as they do not work for private profit they are able to devote year after year considerable sums to important works which are not immediately remunerative or not remunerative at all, and which no other publisher would undertake unless with the assistance of a subsidy...
...[the Presses] have discharged their obligations faithfully and to the public advantage....

The submission dealt elsewhere with the Special Commissioners' implicit contention of 1940 that the University of Cambridge could not be concerned with 'printing and publishing for the outside world'. Cass dismissed this, saying:

The primary concern of Cambridge University for the general advancement of knowledge and learning, rather than for simply local teaching, is manifest in all the historical evidence. Cambridge University is not, and never has been, a factory for producing students with degrees...
History clearly shows that Cambridge University itself has throughout been concerned with the advancement of learning in the noble, global sense rather than in the sense of educating its own scholars. The history of the University is utterly consistent on this point. The purposes are always expressed in the broadest, most comprehensive terms; and there is not the slightest suggestion in seven hundred years of history that the pursuit of them is geographically confined within the 'walls' of Cambridge University. The local education of students is merely one of the University's functions.

He supported the contention with this firm statement from the Report of the 1922 Royal Commission on Oxford and Cambridge Universities:

The University has two main functions to perform. It must provide the best possible teaching for [its students]... and it must also make provision for the advancement of knowledge.

From his study of the history of the University, and the attitudes adopted towards it and embodied in statutory documents by successive monarchs, judges, commissioners and parliaments, Cass then attempted a definition of the University's prime purposes. The reordering of the words in the traditional central phrase was meant to reflect modern emphases:

...the acquisition, advancement, conservation and dissemination of knowledge in all subjects; the advancement of learning, education, research and religion; and the advancement of literature and good letters.

[page 279] He argued that the Press's activities were a necessary, as well as a de facto part of the attainment of these purposes; and the Press's printing and publishing directly satisfied them. The submission then examined the anomaly of the taxation of the Press from several different angles. For instance, the American Branch of the Press - far bigger in terms of sales than any American university press - was exempt from all American tax: yet its income was taxed in the United Kingdom when it was transmitted back. American tax law treated income from a university press as exempt in the ordinary case precisely because it would be derived from an activity that is substantially related to the purposes of the university'. It had always been accepted by the US authorities that the principal purpose of the activities of Cambridge University Press was 'to further the purpose for which the [university] is granted exemption'. Cass commented:

It is faintly amusing that the Press of the ancient University of Cambridge can obtain exemption for its publishing activities in the United States of America yet does not possess such privileges in Great Britain; and that a foreign country can perceive for tax purposes, and act upon, fundamental features of an organization which remain unrecognized in its native land.

The submission then went on to cite relevant legal judgements to support the charitable nature of the Press's printing and publishing activities. Extracts from the Court of Appeal judgement of 1971 in respect of the appeal for registration as a charity by the Incorporated Council of Law Reporting were particularly important, since the points at issue in that judgement were virtually identical to those in the Press's case:

The element of unselfishness is well recognized as an aspect of charity, and an important one. Suppose on the one hand a company which publishes the Bible for the profit of its directors and shareholders: plainly the company would not be established for charitable purposes. But suppose an association or company which is non-profit making, whose members or directors are forbidden to benefit from its activities, and whose object is to publish the Bible: equally plainly it would seem to me that the main object of the association or company would be charitable - the advancement or promotion of religion. (Lord Justice Russell)

Secondly, it is clear that the mere fact that charges on a commercial scale are made for services rendered by an institution does not of itself bar that [page 280] institution from being held to be charitable - so long, at any rate, as all the profits must be retained for its purposes, and none can enure to the benefit of its individual members. (Lord Justice Sachs)

Where the purpose of producing a book is to enable a specified subject, and a learned subject at that, to be studied, it is, in my judgement, published for the advancement of education, as this, of course, includes as regards the Statute of Elizabeth I the advancement of learning. (Lord Justice Sachs)

For the present purpose the second head [the advancement of education] should be regarded as extending to the improvement of a useful branch of human knowledge and its public dissemination. (Lord Justice Buckley)

...the members of the council, who are not more than 20 or so in number at any one time, are precluded by the council's constitution from obtaining any profit or benefit as members from its activities. The council's publications can be bought by the general public and are, as the evidence shows, bought by a wide variety of users, including academic bodies, commercial and industrial bodies (including public utility undertakings), public authorities, government and public departments and offices, trade unions, and a wide variety of libraries, professional institutes and miscellaneous bodies, as well as a great many bodies and persons concerned with the administration and practice of the law, and all of these not merely in this country but also in many other countries within the Commonwealth and elsewhere. (Lord Justice Buckley)

Although the objects of the council are commercial in the sense that the council exists to publish and sell its publications, they are unselfregarding;. The members are prohibited from deriving any profit from the council's activities, and the council itself, although not debarred from making a profit out of its business, can only apply any such profit in the further pursuit of its objects. The council is consequently not prevented from being a charity by reason of any commercial element in its activities. I therefore reach the conclusion that the council is a body established exclusively for charitable purposes and is entitled to be registered under the Act of 1960. (Lord Justice Buckley)

Since every one of those remarks could with great aptness have applied to the University Press - or rather to the Press Syndicate - Cass believed that they pointed to the wholly charitable nature of the Press's activities, and also supported his thesis that the [page 281] Press, had it not been part of the University, could easily have obtained its own registration as a charity, and that for the purposes of the Income and Corporation Taxes Act, the Press Syndicate was a body of persons (or a trust) established by the University for charitable purposes only, and therefore qualified for tax exemption by reference to its own primary purpose. However, he was also confident that the submission proved that the Press's charitable activities fell squarely within the University's primary purposes.

Cass did not know which of his two theses might carry the day, but he believed that he had provided more than sufficient evidence in his sixty-page letter to demonstrate that there was no possibility that the Courts would uphold the 1940 decision of the Commissioners. The virtual uniqueness of the Press meant that a decision in its favour would create no general precedent. Because of this, and in view of the strength of the Press's case, he hoped that the matter could be settled without legal proceedings. He concluded his letter with his genial threat to overwhelm the Inspector with several hundred times more evidence, and as a neat final historical touch, added this envoi, as a last sheet to the letter:

Forasmuch as learning hath antiently had this spetiall favour and priviledge, that upon any occasion of grievance, or complaint offered unto the Two Universities of this Realme, whensoever they have made their immediate recourse to the King or his Councell for speedie redresse and for avoyding length and charges of suit in an ordinary legal proceeding of Justice, they have never beene refused, but allwayes gratiously accepted. (From an Order of the Lords of the Privy Council, in favour of the ViceChancellor of Cambridge University, October 21st 1614. Confirmed by Decree of the House of Lords, May 12th 1647)

Fortunately, the 'formal submission' was never needed. Throughout the case, the Inland Revenue officials were most courteous and helpful. Geoffrey Cass met the District Inspector. A further letter of a mere twenty-three pages, dated 18 December 1975, clarified certain details. The whole matter was then passed [page 281] up to the Inland Revenue Policy Division at Somerset House in London, and the Revenue's own legal advisers began to consider the case.

A letter from the Inland Revenue Policy Division, dated 9 November 1976, gave Cass the momentous news that the Inland Revenue had decided to accept in principle the claim to charitable status. A further letter of 3 December confirmed the details. It seemed that Cass's second thesis had won the day. The Inland Revenue had recognised and accepted the charitable status of the Press and accordingly made tax exemption under the Income and Corporation Taxes Act available to the Press Syndicate. In terms of the Act, the Inland Revenue had accepted that the Press Syndicate was 'a body of persons or a trust established for charitable purposes only'.

The acceptance that the Press's activities were indeed charitable and exempt from tax was not only historically important. It had the practical effect of clarifying in the minds of the Syndicate and its senior officers what they were trying to do overall, so that it had value as a guiding principle in business and editorial policy. As the Chief Executive remarked in his Annual Report on the 1976 Accounts:

The second most important element [in effecting the recovery of the Press] has been the analysis and clarification of the nature, philosophy, objectives and role of the Press. It was this analysis that led to the unswerving pursuit of freedom from tax for the Press: and it was this analysis that has provided an effective reference framework for the whole of the Press's operations.

From the Press's point of view, the tax decision had three invaluable advantages: it finally removed any element of ambiguity regarding the Press's nature; it was implicitly - if belatedly an admission that the Press was a national cultural asset; and it gave a vital boost to the Press's financial viability, liberating funds to serve the world of learning far more effectively, and assisting the long-term enterprise of building up the reserve fund which Wright and Waller and their successors had longed for, and the lack of which had at the end of the 1960s alarmed the University itself, and caused the Syndicate and staff to think that they might soon be looking into the abyss. Nothing in the Press's operations or constitution had significantly changed for some [page 283] sixty years, so the decision also confirmed that the Press had possessed all the qualifications for charitable status since at least 1916.

Oxford University Press meanwhile had been cautiously waiting to see the outcome of the Cambridge case. Soon after the result was known, after consulting Cambridge, Oxford presented their own submission and eventually received similar exemption.

Click for THES article, 12/2/99 summarizing CUP's financial contibutions to its parent university, declared as £32 million over 10 years.

Later posting, Autumn 2006 As far as is known, the only printed acknowledgment by OUP of the facts concerning its tax exemption appears as a short 'Supplementary Note' to the Delegates' Annual Report of 1978. Akme has now obtained and posted as a linked series, the Annual Reports covering this interesting, lean period 1976/7 (pre-exemption) with Akme Introduction, 1977/8, 1978/9, and 1979/80.

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THE SURPRISING TRUTH ABOUT OUP'S 'CHARITABLE STATUS'

THE OXBRIDGE COLLEGE ACCOUNTS INDEX AND OUP ACCOUNTS INDEX

THE MALCOLM vs. OXFORD CASE INDEXES: I (1984-92) AND II (2001-02)

THE HISTORY OF AKME AND OF THIS WEBSITE

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