The Cairncross Review: A Sustainable Future for Journalism, published in February 2019, included the following proposals:

• The Government should introduce new tax reliefs aimed at encouraging (i) payments for online news content and (ii) the provision of local and investigative journalism.
• The Review recommended extending the zero-rating of VAT to digital newspapers and magazines, including digital-only news publications. The present arrangement actively discourages publishers from developing online payment mechanisms.
• The Review also recommended that Government gives priority to exploring the development of a form of tax relief, ideally under the Charities Act but if necessary along the lines of the Creative Sector reliefs, to support public-interest journalism.

The Government has now responded to the Cairncross Review. The confirmation of a review of the VAT zero rate for digital newspapers is welcome and has long been supported by CTG. It also follows shortly after the helpful decision in the News Corp case – read more here. CTG also welcomes the view taken by the Charity Commission (on behalf of the Government) that it would be inappropriate to extend charitable status (and associated tax reliefs) to local journalism where the organisations would not ordinarily have qualified – to do so would have risked diluting charity tax reliefs and the value of charity status – other more appropriate mechanisms are available to support local journalism.

Zero-rating of VAT to digital newspapers and magazines

• The Government accepts the public good of traditional print newspapers and is committed to maintaining zero-rated VAT in this area.
• The Government also recognises that changes in technology are shifting traditional journalism online and we are therefore considering the merits and risks associated with extending the zero rate.
• In addition, the Government has committed to extend the existing tax relief it provides through a business rate relief for local newspapers which has been in place since 2017, until 31 March 2025.
• The Chancellor will consider the case for a range of potential tax incentives to support the news publishing industry this year.

Tax relief to support public-interest journalism

• The Government has concluded that the current Charities Act system accommodates appropriate options for public interest news, but further work was required to help organisations understand their options regarding charitable status. Therefore the Government has worked with the Charity Commission which has published advice on when undertaking or funding public interest journalism can be charitable. This advice also raises awareness of the more detailed guidance available for those publishers in England and Wales interested in pursuing charitable status.
• The Government recognises that journalism provides an important public good to society, playing a vital role in promoting public accountability and ensuring democratic legitimacy. Journalism can be used as a tool to further a number of existing statutory charitable purposes, such as: the advancement of education; the advancement of citizenship or community development; the advancement of the arts, culture, heritage or science; and the advancement of human rights.
• A small number of local/community newspapers are already registered charities (such as the Burngreave Messenger Ltd), as are a number of organisations which are engaged in educational and capacity building initiatives designed to support journalism (such as the Centre for Investigative Journalism Ltd, or the Guardian Foundation). Conversation UK, which publishes an online news and analysis commentary website with articles written by the academic and research community for a general non-academic audience, is also a registered charity.
• These examples show that it is possible for journalist organisations to register as charities under the existing law. However, charitable status is unlikely to be a suitable model for most news publishers given charities must be established and operated to advance charitable purposes only for the public benefit. Most news publishers would be either unwilling or unable to register and operate as charities, for reasons including:
  • they would be prohibited from being ‘for profit’ companies
  • news publication may in the course of its activities support a political party or advocate to secure or oppose a change in the law, government policy or decisions — but charities cannot support political parties and must comply with charity law restrictions on campaigning; and,
  • a charity’s resources may not be used for non-charitable purposes. Newspapers tend to publish a mixture of different journalism — some of which may be potentially charitable and some of which would not, but a charity could not carry out or subsidise the non-charitable work.
• The Government has considered exceptions to the standard requirements to enable publishers to become charities. However, charity as a formal status has a special meaning that relies on public trust and goodwill and needs to be applied consistently. The government is not persuaded that changes to this status should be made. In the US, some not for profit news publishers have what is referred to as 501(c)(3) status, meaning the organisation is exempt from federal income tax. Such an organisation may not intervene directly or indirectly in a political campaign, but it may spend up to 20% of its operating budget on lobbying if it follows the rules of “nonpartisanship”. As outlined above, in the UK it is already possible for not-for-profit journalistic organisations to register as charities, and as such the government does not consider it necessary to modify the legislation.