Newswatch - VAT headache for Murdoch

BSkyB, the satellite broadcaster and key player in Rupert Murdoch’s News International empire, was set to unveil its half-year results yesterday.

Merrill Lynch, the City banking group, was expecting pre-tax profit to fall from #128.6m to #68m on annual turnover of #1,434m. As ever with the Murdoch empire, tax was at the heart of the results.

This time, the forecast profit fall is linked to a VAT charge on the Sky TV Guide – which has been temporarily accounted ahead of an April tribunal decision – and a slowdown in revenues from the sport and film channels.

In recent years, BSkyB has attracted attention for its low rates of corporation tax paid to the Inland Revenue. Last year, the company paid little more than 8% in tax, compared to the 31% standard corporation tax rate. But BSkyB’s corporate tax bill is expected to reach a more orthodox 30% rate by 2000.

A Big Five tax expert says the low corporate tax payments are a result of perfectly legitimate tax planning, such as bringing forward tax losses.

‘News International has always paid seemingly low taxes,’ he says. ‘They’ve achieved this partly by using significant capital gains in the accounts that are not taxed very highly because of inflationary allowances.’

In October, BSkyB, which currently owns 12 UK television channels, launched the UK’s first digital television service – Sky Digital. And the company is unlikely to leave the headlines over the next couple of months, thanks to the Monopolies and Mergers Commission inquiry into its audacious bid for Manchester United, the world’s richest football club. The MMC is due to report its verdict to the trade and industry department in March.