Guardian Media Group Tax Strategy 2 Tax Strategy

About Guardian Group strategy Our tax position in Media Group and results year ended 2 April 2017 Guardian Media Group is one This year, the Group has The Group is committed to Media of the UK’s leading media continued to implement the reporting on its tax position in a organisations. We exist to three-year plan launched in transparent manner and makes Group Tax support quality, independent January 2016, the goals of which extensive disclosures relating and liberal journalism. Our core are to: to tax in its annual financial Strategy business is Guardian News & statements. An abridged version • Address the balance of costs Media, which publishes the of the disclosures for the year- and revenues at the Group, theguardian.com website ended 2 April 2017 detailing focusing on new revenue and the Guardian and the the corporation tax position This tax strategy applies streams including reader Observer newspapers. of the Group is included as an revenues and international across the Guardian Appendix to this document. Media Group. This The parent company of the growth Group is The Scott Trust Ltd, The Group’s business operations • Build a far deeper set of document, approved by a UK tax resident company, in the UK, US and relationships with our which was established to secure have historically been loss the Executive Board of audience; and Guardian Media Group the financial and editorial making. These historic losses independence of the Guardian • Reduce the Guardian’s cost were legitimately used to plc sets out the Group’s in perpetuity. base by 20% offset taxable profits and gains approach to conducting that arose in the year which The Group has business The Group is on track to meant that the Group paid no its tax affairs and dealing operations in the UK, US and achieve the aim of the plan, Corporation Tax in the year with tax risks for the Australia. All companies in the for Guardian News & Media to ended 2 April 2017. year ending 2 April 2017. Group are incorporated in these break even at an EBITDA level Guardian Media Group countries, hold all of the Group’s by 2018/19, and for the Group to The Group collects and pays assets and are fully subject become financially sustainable indirect and payroll taxes in the regards the publication to prevailing tax laws and in perpetuity. countries in which it operates. of this tax strategy as regulations. In 2017, the Group collected and For the year ending 2 April 2017 paid £49.8million of income complying with the duty The Group also has an the Group reported revenues of taxes and social security endowment fund which exists £214.5m, up 2% on the previous under paragraph 16(2) associated with its employees. of Schedule 19 of the solely to support and fund our year, as the Guardian continued journalism. The endowment to strengthen its relationship Finance Act 2016. fund consists of diversified with its readers and saw good medium and long term focused growth from Guardian US and investments managed by a . number of specialist fund In a significant move towards managers. The investments securing the Group’s long-term include global and emerging future, the value of the Group’s markets equity, fixed income, investments and cash holdings hedge funds and private equity has risen to £1.03 billion. This and venture capital funds. was due to a 20.6% increase in Whilst the investments are the value of the endowment a mixture of UK and non-UK fund and the sale of the Group’s assets, they are all held by UK 22.4% stake in plc, tax resident companies in the the international business- Group which are fully subject to to-business media and events UK tax laws and regulations on group, for a gross consideration all of the income and realised of £239m. gains arising from all of the investments held. During the year, the Group reduced its costs by £19 million Our values to £259.2m, and reduced CP Scott, the famous headcount by approximately Manchester Guardian editor, 300 FTE roles. These moves, outlined the paper’s principles painful though necessary, in his celebrated centenary enabled the Group to reduce leader on May 5, 1921. The losses at the EBITDA level by much-quoted article is still 35% to £44.7m before £9.6m of used to explain the values of exceptional costs. the present-day newspaper, Trust and Group. The values he described are: honesty; cleanness (today interpreted as integrity); courage; fairness; and a sense of duty to the reader and the community. 3 Guardian Media Group Tax Strategy

Our tax strategy Our approach to governance The level of risk in relation Our tax strategy seeks to enable and support arrangements and to UK taxation that we are the Group’s business strategy by managing risk management prepared to accept tax risks and costs in a manner consistent Governance arrangements The Group has a low appetite for tax risk and with The Scott Trust values. manages its tax affairs accordingly. Whilst The Guardian Media Group plc Board standardised, acceptable levels of tax risk Our tax strategy consists of four key approves the Group’s tax strategy. From are not formally documented or quantified, principles: an operational perspective, the Audit tax risk is primarily managed with the aim Committee, made up primarily of 1. We manage our tax affairs in a manner of complying with all relevant laws and independent non-executive directors, is consistent with the values of The Scott regulations and preventing and reducing tax considered to be the supervisory body for all Trust and the organisation’s purpose disputes and uncertainty. to secure the financial and editorial Group tax activities and monitors on-going independence of the Guardian in compliance with the tax strategy. This is achieved by maintaining documented perpetuity and to support journalistic policies and procedures in relation to The head of tax is responsible for ensuring freedom and liberal values. tax risk management and maintaining that appropriate procedures and guidelines open and constructive relationships with 2. We seek to act lawfully and with integrity are established, and suitable training and tax authorities. when managing our tax affairs by paying education provided to support the four and collecting tax in accordance with strategic principles detailed above. Our attitude towards all relevant laws and regulations in the The head of tax meets regularly with the tax planning countries in which we operate. If we Chief Financial Officer and Finance Director discover instances of non-compliance we Our attitude to tax planning is governed by seek to resolve them with the appropriate to discuss tax matters as they arise including the four key strategic principles detailed tax authority. the impact of the introduction of new tax above in the ‘Our tax strategy’ section. The legislation on the Group, the tax implications Group may engage in tax planning in order 3. We only engage in reasonable and of changes to the Group’s operations and the to manage its tax costs and an assessment sustainable tax planning that is aligned outcomes of tax risk management reviews. of the appropriateness of doing so is made with commercial and economic activity. against all four principles to ensure they are This means: The head of tax reports at least annually to the Audit Committee on the tax position of adhered to. • We do not enter into artificial tax the Group and the on-going adherence to the External tax advice is taken from time arrangements; tax strategy. to time where clarification of the tax • We only respond to tax incentives and Risk management implications of the Group’s activities is exemptions in the manner in which they required. were intended; and Tax risks can arise as a result of changes in tax legislation and changes to the Group’s Our approach towards our • All transactions between Group underlying operating model, systems and dealings with HMRC companies are carried out on an arms- processes. The head of tax is responsible length basis. for ensuring that the Group’s tax position A constructive relationship with HMRC is and tax risk management procedures are important in the operation of the Group’s 4. We are open and transparent with tax tax strategy. authorities and provide all relevant and regularly reviewed to enable the appropriate reasonable information that is necessary management of tax risk. We engage in an open and transparent for them to fully understand our tax The tax function actively assesses and way with HMRC to allow them to fully affairs. monitors UK tax risk throughout the year understand our tax affairs. Where by maintaining a detailed tax risk register, appropriate we engage with them on a which documents the processes and controls timely basis and seek advance clearance, implemented to mitigate the risks. The tax either formally or informally, on the tax risk register is reviewed regularly during implications of a transaction or a change to the year to ensure its completeness and to our business. check the effectiveness of the processes and We have a track record of pro-actively controls. The outcomes of the reviews are bringing tax issues in our business to the discussed with the Chief Financial Officer attention of HMRC and collaboratively and Finance Director and, where issues are working with them to resolve these as identified, new processes and controls are quickly as possible. designed and implemented. 4 Guardian Media Group Tax Strategy

The following abridged Appendix: disclosures detail the corporate Abridged tax disclosures tax position of the Guardian Media Group for the year ended 2 in the Guardian Media April 2017. The full tax disclosures including those relating to Group plc financial deferred tax can be found in the Guardian Media Group plc statements for the consolidated financial statements year ended 2 April 2017 for the year ended 2 April 2017.

1. Corporate tax charge

2017 (£ m)

Corporate tax credited in the income statement: Corporate tax (1.2) Corporate tax charged to the consolidated statement of comprehensive income: Corporate tax charge on unrealised profits on available for sale financial assets 1.2

Corporate tax charge -

2. Factors affecting corporate tax charge for the year The tax charge on the loss before tax for the period is equal to the standard rate of corporation tax in the UK of 20%. The adjustments which increase and decrease the tax charge are reconciled below:

2017 (£ m)

Loss before tax (0.2) Tax on profit calculated at standard rate of 20.0% -

Adjustments increasing the corporate tax charge in the year: Expenses not deductible for tax purposes 1.6 Foreign taxes paid 0.1 Increase in tax charge in respect of joint ventures and associates 4.9 Increase in tax charge on available for sale financial assets 1.0 Depreciation in excess of capital allowances 1.3

Adjustments decreasing the corporate tax charge in the year: Utilised tax losses in the year (8.0) Tax relief on pension contributions (0.2) Short term timing differences on accounting provisions (0.7)

Total corporate tax charge - 5 Guardian Media Group Tax Strategy

3. Details of items increasing and decreasing the corporate tax charge for the year Expenses not deductible for instead perform a separate These transactions are Utilised tax losses arising in tax purposes calculation of the taxable gain subsequently brought into the period made on disposal in accordance account for tax purposes on the Some expenses by their very The Group has utilised historic with the relevant tax legislation. disposal of the assets. nature are entirely appropriate losses to offset profits and The taxable gain was greater charges for inclusion in these Depreciation in excess of gains recognised in the income than the accounting profit financial statements but are not capital allowances statement and consolidated on the disposal and therefore allowed as a deduction against statement of comprehensive contributed to an increase in the The accounting treatment of taxable income when calculating income earned in the year which corporate tax charge in the year. expenditure on fixed assets the tax liability. Examples of has resulted in a reduction in the differs from the tax treatment. such expenditure are certain Increase in tax charge corporate tax charge in the year. For accounting purposes an legal expenses and depreciation on available for sale annual rate of depreciation is Tax relief on pension charged on assets that do not financial assets applied to the cost of the assets contributions qualify for capital allowances. The accounting treatment of over their useful economic life. The Group is entitled to claim a Foreign taxes paid disposals of available for sale Tax relief is only available for the tax deduction for the payment financial assets differs from depreciation charged on fixed The majority of the Group’s of contributions into its pension the tax treatment. For tax assets held under finance leases. activities are performed and schemes which has resulted in purposes, the Group is required Instead, capital allowances taxed in the UK. Certain local a reduction in the corporate tax by law to ignore the accounting are available to be claimed on taxes are incurred by the Group’s charge in the year. transactions and instead non-finance lease assets as a activities in Australia and the US. perform a separate calculation tax relief provided in law. The Short term timing differences Increase in tax charge in of the taxable profit or loss made depreciation charge on which on accounting provisions respect of joint ventures and on disposal. The taxable profit no tax relief was available was Short term timing differences associates was greater than the accounting greater than the value of the arise on items such as certain profit on the disposals and capital allowances claimed and The Group did not hold any joint provisions because the therefore contributed to an therefore contributed to an venture investments in the year. treatment of these items is increase in the corporate tax increase in the corporate tax different for tax and accounting The accounting treatment of the charge in the year. The Group is charge in the year. purposes. The Group is entitled disposal of Ascential plc differs also required by law to disregard to claim a tax deduction on the from the tax treatment. For tax for tax purposes the accounting commercial utilisation of these purposes, the Group is required transactions associated with provisions, which has resulted in to ignore the accounting derivatives entered into relating a reduction in the corporate tax transactions and to the available for sale financial charge in the year. assets.