Iliffe is now facing the prospect of a claim from the Government over tax deductions claimed on payments totalling £51.4m.
The First-tier Tribunal has ruled that the company was wrong to claim a tax deduction on payments made by subsidiary companies for the use of their own newspaper mastheads on titles such as the Cambridge News.
It emerged in evidence that senior executives were keen to hide the profits of subsidiaries in order to deter rival titles from launching new papers to take a slice of advertising revenue and to make it harder for the National Union of Journalists and editorial staff to press for higher wages.
In 2002, Iliffe was apparently facing the threat of strike action at Herts and Essex Newspapers Limited, Staffordshire Newspapers Limited and Cambridge Newspapers Limited.
That year a publication called the UK Press Directory revealed that Herts Newspapers was the newspaper company with the highest percentage operating profit margin in the UK.
A 2003 email from Tony Morton, finance director of Iliffe parent company Yattendon, to accountants Ernst and Young said: “What we would like to do is to be able to reduce reported profits in the newspaper subsidiaries, since the levels of profit become common knowledge and could lead to union claims.
“They are also highlighted in a publication called the UK Press Directory, which lists companies by 40 various measures and we are not too happy to come out top of the league on the profit measures.
“Any adjustment is only worthwhile if it can be significant, just playing at the edges is not a lot of value.
“We don’t want to make the businesses more difficult, and as I have said we don’t just want to tinker round the edges. Is there any legitimate way in which we might achieve our objective without any negative tax implications?
Under the new system multi-million payments were siphoned off from Iliffe’s various local limited companies to appear in the accounts as “publishing rights and amortisation”.
According to the Tribunal judgment: “the group hoped that the majority of people who would look at the accounts would look ‘to the bottom line numbers’, and, in any case, would not be able ‘to tell directly what those publishing rights and the amortisation were’."
Morton said that the deduction “did do something for the transparency of [the] accounts’ (in the sense of reducing the profit in a somewhat opaque way)”.
Iliffe chief executive David Fordham said in a statement to Press Gazette: “These were commercial transactions (which the court acknowledged) carried out several years ago, with full and proper advice taken at that time. We will pay whatever tax the courts finally decide is due, but at this stage are still considering the detailed implications of the judgment.”
Last month Iliffe News & Media and Northcliffe Media were both sold to a new joint venture called Local World. Illiffe retains a 21.3 per cent shareholding in the new business.
Iliffe News and Media current titles:
Cambridge
Dailies
- Cambridge News
Free weeklies
- Cambridge News & Crier Now
- Ely Weekly News
- Haverhill Weekly News
- Newmarket News
- Royston Weekly News
- Saffron Walden Weekly News
- Huntingdon/St Ives & St Neots News & Crier
Other Titles
- Style Magazines (free monthly)
- Cambridgeshire Journal (part paid for monthly)
- Cambridge Business (free bi monthly)
- HomesNow Magazine (paid for weekly)
- JobsNow E-zine (free weekly)
Herts & Essex
Paid-for weeklies
- The Hertfordshire Mercury, The Buntingford & Royston Mercury, The Hoddesdon & Broxbourne Mercury, The Cheshunt & Waltham Mercury
- The Herts & Essex Observer
Free weeklies
- The Harlow Star, The Herts & Lea Valley Star,
- Hitchin/Letchworth Advertisier, Stevenage Advertiser, Biggleswade Advertiser
Other titles
- Trend Magazine (3 x year free)
- JobsNow E-zine (free weekly)
Bedfordshire and Northamptonshire
Free weeklies
- Bedfordshire on Sunday
- Bedford Midweek
- Luton on Sunday
- Luton & Dunstable Express
- MK News
- Northampton Herald & Post
- Wellingborough Herald & Post
Staffordshire
Dailies
- Burton Mail
Paid-for weekly
- Ashbourne News Telegraph
- Black Country Bugle
- Staffordshire Newsletter
- Uttoxeter Advertiser
- Leek Post & Times
- Uttoxeter Post & Times
Free weeklies
- Burton & South Derbyshire Advertiser
Part-free part paid-for
- Nuneaton News
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