Sky magazine tax loophole saved broadcaster up to £40m a year

BSkyB HQ in west London. Accounts show most of the income from Sky magazine was recycled back to Sky TV. Photograph: Graeme Robertson for the Guardian

A magazine for satellite TV customers published by BSkyB was used as atax avoidance scheme that saved the company up to £40m a year.

The broadcaster had been saving millions in VAT by charging satellite customers a nominal £2.20 a month for the Sky magazine, using a tax loophole that has now been closed. Magazines, along with books and newspapers, are normally zero-rated for VAT, and this meant Sky could avoid VAT on a small but significant percentage of revenue. The saving, at about £3 to £4 per person, would have amounted across Sky's 10 million subscribers to at least £30m to £40m a year.

A court battle involving Debenhams at the beginning of the decade highlighted the problem of VAT avoidance through the artificial splitting of services between different parts of a corporation.

But in 2005 UK courts ruled that cable companies were allowed to deduct VAT on "cable guide" magazines and similar publications, if they structured them so that customers did receive a genuine product from a separate company, delivered at a fair price.

In 2005 Sky relaunched BSkyB Publications with James Murdoch on the board, and in 2007 they took production of Sky magazine in-house and also began distributing Sky Sports magazine and Sky Movies magazine. A small note on the Sky magazine masthead in 2011 told readers: "£2.20 of your package price is paid by you to BSkyB Publications Ltd for this magazine."

Some readers raised objections on online talkboards to the fact that when they had tried to cancel the "crap" magazine they had been told that their subscription was discounted by the magazine's price, and if they opted out they would no longer get the discount.

"What Sky are doing is saving themselves some VAT. It's perfectly legal and it's something any efficient company would do," wrote one poster.

BSkyB Publications' accounts show that most of the income from the supposed monthly price of the magazine was recycled back to Sky TV, described in its books as payments for "customer data" and "support services". This left only a modest apparent profit on BSkyB Publications' accounts. But in December 2010, apparently as a sop to Liberal Democrat and UK Uncut campaigning on the issue of tax avoidance, the Treasury minister David Gauke announced a variety of anti-tax avoidance measures, to be enacted in the following spring. This included legislation against VAT "supply-splitting".

In February 2011, when the legislation was published in the same form despite energetic lobbying, Sky said it would end publication of Sky Movies magazine and Sky Sports magazine, and downsize Sky magazine, with a potential loss of 20 jobs. Coming in the middle of the financial crisis, it was widely perceived as a cash-saving exercise.

A fresh inquiry launched by the Metropolitan police into phone hacking was also occupying people's minds. By October all publications had been pulled, and BSkyB Publications was also being wound down. A footnote in Sky's quarterly report for September 2011 noted that Sky had previously recognised benefit from the zero-rated VAT treatment at about £3 to £4 per head, but that this had now been "restated".

A spokesman for HM Revenue and Customs told the Guardian it was not possible to comment on individual cases. "If there is some kind of contrived scheme or vehicle, ie it's obvious that the purpose of the scheme is to avoid paying VAT and it's taking advantage of a loophole and we consider that tax is actually owed on the scheme, rather than just being a case of sensible tax planning … we can make the judgment that this is not legitimate tax planning. And if we consider that somebody has not applied the rules we will then go back three to four years and if there is back tax owing we will ask them for it."

Sky said in a statement: "The TV listing magazine that Sky used to publish was, in common with all newspapers and magazines, zero-rated for VAT. Sky directly contributes more than £1bn a year in tax – a total of 1.4% of all taxes paid by the 100 largest FTSE companies. We're proud of the significant – and growing – contribution we make to the British economy."

John Christensen of Tax Justice Network said: "Tax avoidance is deeply engrained in Britain's corporate culture. While the government's proposed general anti-avoidance rule will go some way to remedying this, more needs to be done to put pressure on accountants, tax advisers and tax lawyers to build tax compliance into their professionals norms and guidelines. Tax avoidance is now a high-risk activity, not just to the companies involved, but also to the reputations of their professional advisers."

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Hollywood Reporter apologises for role in McCarthy-era blacklist

Hollywood Reporter founder Billy Wilkerson in 1939. Photograph: George Hurrell/AP

US film industry magazine the Hollywood Reporter has apologised for its role in kickstarting the infamous 1947 blacklist that destroyed the careers of writers, actors and directors accused of being communist sympathisers.

In its latest issue, the magazine features a column by Willie Wilkerson, son of founder Billy Wilkerson, admitting his father was motivated by spite to publish lists of left-leaning film industry workers that influenced US politicians during the postwar McCarthy era. The elder Wilkerson was annoyed at having been shut out by an exclusive "club" of Hollywood bosses when he tried to open his own studio in the 20s, his son revealed. By way of revenge, the magazine's proprietor decided to destroy his enemies' most valuable commodities by labelling them communists.

"No one has ever apologised to the victims of this holocaust," writes the younger Wilkerson, whose father published the Hollywood Reporter between 1930 and 1962. "So on the eve of this dark 65th anniversary, I feel an apology is necessary. On behalf of my family, and particularly my late father, I wish to convey my sincerest apologies and deepest regrets to those who were victimised by this unfortunate incident."

Wilkerson's 1946 campaign against alleged communists in the pages of the Hollywood Reporter influenced the infamous House Committee on Un-American Activities, which the following year cited 10 writers and directors for contempt of Congress for refusing to testify before it. A group of studio executives acting as the Motion Picture Association of America then announced the firing of the "Hollywood Ten" in what became known as the Waldorf Statement. Blacklisting continued until at least 1960 when the Oscar-winning screenwriter Dalton Trumbo, who had been forced to move to Mexico City and write under an assumed name, was publicly acknowledged by Kirk Douglas and others for his work on blockbusters such as Spartacus and Exodus.

The Oscar-winning actor and political activist Sean Penn also writes for the magazine about his father, Leo, who was blacklisted for several years for expressing sympathy with trade unions. He remembers seeing the elder Penn deliberately blank the director of On the Waterfront and A Streetcar Named Desire, Elia Kazan, when father and son accidentally stumbled on to the set of the film-maker's 1976 movie The Last Tycoon during a beachside walk. Kazan had named colleagues and industry friends as communists before the committee to save himself from prosecution. Penn also calls for the body that organises the Oscars to apologise for its role in the blacklist.

"The Academy of Motion Picture Arts and Sciences has yet to offer a clear acknowledgment of its own complicity in the shameful witch hunt of the 50s that was the blacklist," writes Penn. "In the name of patriotism and patriots (most of whom would never have even asked for it) and in the name of our own dignity … it's time."

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Britain's rarest record – yours for £200,000

The Quarry Men in 1957, with John Lennon in the centre. Photograph: PA

Among the many John Lennon vocal performances captured on vinyl, the following may not be the most familiar: "Yeah, I'd like to say hi to all of you … The message is, you know – if you like it sell it, if you don't, try and sell it anyway cos we're all in the same business." Lennon's laconic pep talk can be heard on a 7in single recorded for EMI salesmen in 1974 to encourage them to push his new album. He can be heard, that is, if you have the £2,000 required to buy one of the handful of copies that were pressed.

The figure is quoted in the latest Rare Record Price Guide 2014, a bi-annual brieze block of musical small-print whose newest edition has just been published by Record Collector magazine. Among its 100,000 entries are details of releases so arcane they make the Lennon single look like a copy of Do They Know It's Christmas?. Accompanying its release, the magazine is featuring its list of "The 200 Rarest Records Today". To read it is to enter a world at once entirely recognisable yet utterly abstruse, where the Beatles, David Bowie and Queen rule the roost, but only in the bizarrest of out-takes and mutations. What is clear, however, from the article's opening line, is that even with "gold on the slide, the price for mega-rare vinyl remains unaffected by the recession".

"We're talking about the top end of the market," says Ian Shirley, editor of the guide. "Top end for a record is anything from £200 to £10,000. Rare means, one, there are not many of those records around, and two, they're records people want to desperately own. It's the cachet, the desirability. We have dealers who we talk to about the prices they're selling records for. We have collectors who give us feedback on what they've been paying. And there's now an open auction market on trading sites and eBay, so you can see what those records sell for."

At once democratic and international, the eBay effect has massively reinvigorated the market. "The amount of records that have come out of the woodwork in the past three or four years has been phenomenal," says Shirley. "Because, although a lot of records aren't rare, when people do put Holy Grail items up for sale, collectors go absolutely mad for them. Because these records just don't turn up. Then suddenly there you are sitting in Japan or Germany or Russia and a record appears on eBay that you haven't got, have never seen before and desperately want – you're going to go all-out for it."

The Rare Record Price Guide deals with records officially issued in the UK. While obscurities by the household names of pop have consistently commanded the highest prices, it is pyschedelia and prog rock that are on the up. Should your attic, or indeed your granny's attic, contain a copy of Tinkerbells Fairydust's 1969 Decca LP Tinkerbells Fairydust, you are looking at £3,000, no questions asked. "A list compiled for the US would be completely different," says Shirley. "But when it comes to psychedelic music of the 60s, progressive music of the early 70s, punk, new wave, and non-Jamaican reggae, the UK is the hotbed of collectables."

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Confession: I Am Over Black Nail Polish. Are You?

Forget the bags, the shoes. For the nail polish obsessed, the best accessory for fall is lacquer. So what shades generated the most buzz at fashion week? Think deep, dark variations of red and navy offset by cool tones of minimalist white and beige. The bigger moments of drama belonged to pop-art effects and touches of texture (leather nails!) worn in an unexpected way.

Now, I retain the right to change my mind any second now, but lately, I’ve just been completely done with black nail polish. I’m over it. We are no longer friends. What about you?

I mean, clearly, plenty of people disagree with me. I still see it out and about on women here in New York on a daily basis. And celebrities are still going out with black-lacquered fingers and toes.

But I don’t know, I think I just overdosed on it or something–I just can’t bring myself to choose onyx polish at the salon anymore. I’m more into taupes, browns, plums, navys and other dark shades for some reason.

How about you? What are your feelings on black polish these days? Vote below.

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