Against a backdrop of 'fake news' and the impact of the internet on print journalism, the UK government tasked Dame Frances Cairncross in 2018 with conducting the Review, which was published in February 2019.
The basic conclusion of the Review is that high quality, independent journalism matters in a democratic society, and that government intervention to ensure a sustainable future may therefore be warranted. If this intervention includes the introduction of new charitable tax reliefs, the Review will not only be a significant advance for UK journalism, but also for the sector.
The recommendations of the Review
The Review considers the state of journalism in the UK, in particular the challenges posed by online distribution and social media. It culminates with nine recommendations which are intended to improve the market for journalism, encourage innovation, and incentivise the production (and consumption) of high-quality news. While several of these are focused on the market for commercial news, social media and the imbalance between publishers and online platforms, there are three recommendations of particular interest to the nonprofit sector:
The creation of a new Institute for Public Interest News. This would act as a center for excellence, commission research and collaborate widely on initiatives designed to encourage the supply of public interest news. This body is conceived of as a potential equivalent to the Arts Council.
The proposed Institute would receive 'innovation funding' from government, another of the recommendations contained in the Review. It would also potentially receive funding for local public interest news and possibly take over, or co-manage, the existing BBC initiative known as the Local Democracy Reporting Service.
The recommendation of most interest to charities and philanthropists is that new forms of tax relief should be launched to encourage the provision of local and 'investigative' journalism, as well as to encourage payments for online news content.
Tax reliefs: the UK status quo
In common with Canada, the US, and many other countries worldwide, the UK grants certain tax reliefs as a matter of public policy to organisations that are charitable, and in respect of donations to them. A 'charity' for UK tax purposes must, among other things, be formed for purposes that are 'exclusively charitable' for the public benefit, currently codified in twelve specific 'heads' of charity, as well as anything, under a thirteenth head that is recognised as being sufficiently analogous.
However, public interest journalism is not one of the recognised heads and attempts to register charitable organisations with this purpose have failed. There are certainly organisations undertaking or funding journalistic activities, but these may only be a means of achieving another recognised purpose, such as the advancement of education or the promotion of human rights. In other words, public interest journalism, no matter how laudable, is not charitable per se. Without charitable status:
- donations from private individuals or businesses wishing to support investigative journalism fail to attract charity tax reliefs;
- an existing charity (including a philanthropic foundation) may not make unrestricted grants to support investigative journalism; and
- an organisation that carries out or commissions investigative journalism will only enjoy charity tax reliefs (including relief from tax on its profits of trade and ancillary reliefs such as on local property tax) if its activities are a satisfactory means of carrying out another charitable purpose.
It is important to note that journalism charities would be subject to all the existing regulation applicable to other charities, including the limitation on certain types of 'campaigning' and political activity, and the limitations on private benefit.
More narrowly, in relation to UK Value Added Tax (VAT), digital newspapers and magazine are currently not zero-rated, which discourages mechanisms for online payment of journalistic content.
Changing the landscape
Recognition of public interest journalism as 'charitable' could be achieved in a number of ways, including a reference to the Charity Tribunal. However coming out of the Review, the most likely route seems now to be changes to the primary legislation to extend the list of recognized charitable purposes.
Amendment of the Charities Act 2011 (and if thought locally appropriate), the corresponding legislation in Scotland and Northern Ireland, would allow access to the generous charitable tax reliefs without the introduction of a bespoke incentive.
Following publication of the Review, there has been some support for the recommendation within government. Jeremy Wright MP, the Culture Secretary has since announced to Parliament that he has ‘written to the Charity Commission and look[s] forward to hearing how they can help move this forward.’
Alternative options suggested in the Review include a scheme analogous to the reliefs introduced to develop the British film and video game industries.
Forecasting the future: charitable journalism in the UK?
While the Review represents an exciting step forwards in UK public interest journalism, it has no effect on the existing state of the law. It is also not the first time charitable status in this area has been the subject of public attention. Back in 2012, the House of Lords Select Committee on Communications' Inquiry into the future of investigative journalism nearly coincided with the high profile second rejection of the Bureau of Investigative Journalism's application for charitable status. The HL Committee suggested that charitable status for certain types of journalism could unlock philanthropic investment and enable responsible investigative journalism to flourish. Its principal message has no doubt informed the present Review: that high quality public interest journalism matters for the 'wellbeing of democracy'.
Whether Parliament will pursue the legislative changes proposed is not clear, particularly with Brexit dominating the legislative reform landscape.
