Plans to tax university presses

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 £448m and a profit of £65m in the year to March 2006? The Bookseller magazine has estimated it would have to pay £19m 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.

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