Tales of the unexpected from BSkyB: a profit and a payment to the taxman

BSkyB, the digital TV company 36 per cent owned by Rupert Murdoch, is to include a provision in its financial results to pay the full rate of corporation tax, an unusual occurrence in the Australian media mogul's empire.

This is despite "tax losses" of around £450m that should have meant it escaped the full brunt of the taxman for at least another two years – and avoided around £130m of tax.

BSkyB has paid little tax in its life due to large losses incurred when it was first set up in 1989, and also when it began its digital service in 1998. Its tax affairs are complex but in effect it has not yet paid any UK corporation tax.

In the financial year 2003 the company is expected to make a profit for the first time since the digital service launched. But it will assume it will pay the full 30 per cent rate of tax, despite the losses.

The news prompted SG Securities analyst Anthony de Larrinaga to downgrade his earnings estimates by 28 per cent to 7.7p a share, or £145m.

"We are slightly perplexed as to why the provision is being recognised, yet the company still maintains these [tax] losses will be utilised and that there will be no change in charge by the tax authorities," stated SG research.

The question is whether it will have to pay the tax in cash. BSkyB is understood to be adamant that it can avoid paying the tax. But one tax expert queried why it would make a provision if it was certain it could avoid it:"If the Inland Revenue had agreed on the tax losses, it must be able to recognise them, so there must be some issues hanging over of sufficient magnitude."

It is understood that the delay is due to the creation of necessary company structures. Clever lawyers and accountants work on moving assets around in a holding company to minimise the amount of tax it pays – and BSkyB's are known to be particularly clever.

A spokesperson would not comment on the tax losses, except to say: "BSkyB always adopts the most prudent accounting policies."

It recently changed auditor following the Enron scandal from Arthur Andersen to Deloitte & Touche.