The Shadowy Conglomerate Behind LBC

LBC is in the news, and not in a good way. A few weeks ago, it took Sangita Myska off air without warning or explanation, eventually replacing her with Vanessa Feltz and Ali Miraj as part of a wider schedule reshuffle. The unprecedented listener backlash following her defenestration has focused attention on LBC’s shadowy parent company.

What is Global Media & Entertainment Ltd, who owns it, and why should the public care about it?  

Horses for Courses

The story starts in 2008 when millionaire bookmaker and racehorse owner Michael Tabor bought his son Ashley a media company. Although Ashley had never held a senior job in a media company, he was already running a successful talent agency, Global Talent, so becoming sole managing director of a media company perhaps didn’t seem that much of a stretch.

Backed by his father’s money, Ashley went on an acquisition spree, first purchasing Chrysalis Radio, then fighting a fierce battle to take over GCap media and its network of FM channels.  

By the end of 2008, This is Global, as Ashley’s company was then known, had acquired an enormous sprawling portfolio of radio stations and brands. Ashley recruited a team of experienced industry professionals, headed by Stephen Miron, formerly managing director of the Mail on Sunday, who became the group’s chief executive. The team reorganised the company’s offering into seven “core brands”: Heart, Capital, Smooth, Gold, Classic FM, Radio X, and LBC. 

This Is Global continued to expand through acquisition, buying GMG Radio in 2012. In 2017, it changed its name to Global Media and Entertainment Ltd., and embarked on another buying spree, this time focused on outdoor advertising, in which it quickly become a market leader. And in 2021, Global entered the podcast space, buying a hosting, distribution and monetisation service and launching several podcasts with well-known hosts. 

Global’s rapid expansion was entirely financed by debt, and the debt has never been repaid. Most of it takes the form of long-term “shareholder loans” from its Jersey-based parent, Global Radio Group Ltd. Shareholder loans are an alternative to equity finance. Instead of issuing additional shares for its shareholders to buy, the company borrows from its shareholders, and the shareholders receive interest payments on those loans in lieu of the dividends they would have received on shares.

Since interest payments are made before tax while dividends are paid after tax, shareholder loans are a way of avoiding tax.  

Tax Loopholes

Interest rates on shareholder loans are typically very high since they are subordinated to the company’s other debts and thus more likely not to be repaid in the event of insolvency. The high interest rates provide shareholders with a generous stream of cash. They can also bleed a company dry. In Global’s case, that’s exactly what they do. And this appears to be intentional.  

Interest payments on Global’s borrowing are so large that the company has made a pre-tax loss in every year but one since its founding. In 2018 it delivered a pre-tax profit, but then borrowed lots more money from its parent to fund the acquisition of two outdoor advertising companies. The profit disappeared, never to be seen again.  

Until 2017, Global was able to set off almost all of its losses against tax. As a result, it paid no UK tax. It even recorded tax credits, known as “deferred tax assets”, on its balance sheet. By 2016, these were worth over £5.2 million.   

However, in 2017, HMRC restricted corporations’ ability to offset interest payments against tax. This was to discourage “base shifting”, the practice of using debt and intercompany transfers to squirrel away profits offshore, thus avoiding UK corporate taxation.

UPDATE

Sangita Myska: More Media Figures Sign Open Letter to LBC Expressing ‘Deep Concern’ About Her Departure

Broadcasters and politicians say they fear her “abrupt” exit from the station means “excellent journalists are at risk for simply doing their job and asking robust questions”.

Byline Times Reporter

Global was caught by this legislation, and since then has incurred corporation tax on its pre-tax losses. But it is still finding ways of not paying tax. In 2017, it used the £5.2m tax credits built up prior to 2017 to offset its tax liability. In effect, HMRC paid these taxes. And by 2023, Global was reporting nearly £38.8 million of deferred tax liabilities (that’s “unpaid taxes” to you and me), mainly arising from the way it chose to calculate the future value of intangible assets.  

Some of the shareholders’ loans have been issued as tradeable notes on recognised stock exchanges. In 2013, Corporate Watch pointed out that these notes were a vehicle for tax avoidance:  

Global’s owners can receive the interest payments tax-free because they have issued the loans as “quoted Eurobonds”. Normally, when a UK company pays interest to a non-UK company, it has to “withhold” 20% of the payments and give it to the UK tax authorities. But if the loans are issued as quoted Eurobonds* on a “recognised” stock exchange, such as the Channel Islands’ or the Cayman Islands’, they benefit from an exemption that means no withholding tax is taken off. 

(*A Eurobond is a bond issued outside the jurisdiction of the country in whose currency it is denominated.) 

Global ignored Corporate Watch’s criticism. And after heavy lobbying from the finance industry, HMRC decided not to close this loophole. Ten years later, Global had £1.35 billion of tradeable notes bearing interest rates of 12-15%. That’s an awful lot of cash paid and tax avoided.  

A debt-laden corporate structure doesn’t just minimise tax bills, it also helps keep costs down. Several media industry sources have told me that executives faced with demands for pay rises point to persistent losses arising from exorbitant intercompany interest charges and cry, “We can’t afford it, we’re really struggling”.  

Tax-avoiding, wage-squeezing structures of this kind are very common. Despite repeated attempts by tax authorities across the world to clamp down on aggressive avoidance schemes and base shifting, corporations like Global can still reduce tax bills and wage costs by moving money around. But from January 2024, a minimum global corporation tax rate of 15% will apply. Global’s 2023 accounts highlight this as a “factor that may affect future tax charge.” 

Ownership and Regulation

So the party may soon be over for Global and its tax-avoiding parent. But who owns Global’s parent?

Offshore structures are notoriously opaque, so it’s difficult to identify the ultimate owner. According to Corporate Watch, Global Radio Group Ltd. (Jersey) is 99% owned by a company called Global Radio Worldwide Ltd. (British Virgin Islands), with the other 1% personally owned by Ashley Tabor-King. However, the UK’s Companies House website shows that Michael Tabor is listed as “person with significant influence” over Global Media & Entertainment Ltd.

As this usually means a controlling shareholding, it seems likely that Michael Tabor is the ultimate owner – and as a resident of Monaco, he is not liable for UK tax.  

Global’s dominance in the UK’s commercial radio industry gives it considerable control over what the public hears. For example, in 2015, the Swiss subsidiary of the UK bank HSBC admitted it had helped wealthy clients hide assets from tax authorities. Global instructed all its radio stations not to report this news story as it broke. After listeners complained, Ofcom investigated but decided that Global had “good editorial reasons” for delaying reporting for four days. Neither Ofcom nor Global have ever revealed what those reasons were.

Britain’s Foreign Media Oligarchy

Sir David Barclay (left) and his twin brother Sir Frederick after receiving their knighthoods from the Queen at Buckingham Palace in 2000. Photo: Michael Stephens/PA Wire/PA Images

Sam Bright

But surely this was an important public interest story? What editorial reasons could possibly override the right of the people of the UK to know about it? Companies House records show that at the time, HSBC held a charge over Global’s assets as security against borrowing. Was this a factor? We, the public, have a right to know.  

Regulators have attempted to restrict Global’s dominance. In 2008, the Competition Markets Authority forced Global to sell some of the radio stations it had acquired from GCap. And in 2012, it demanded that Global sell seven radio stations. After a fierce legal battle, Global eventually agreed to sell part of its network to the Irish broadcaster Communicorp. But it retained the brand names. Communicorp pays Global a license fee for their use. Is this really competition?  

Neither Ofcom nor the CMA have addressed the deep malaise in the UK’s radio industry that Global’s dominance causes. In a healthy industry, a listener who disliked the editorial line of one company could easily switch to another, and a presenter let go by one media organisation could quickly find a home in another. But the UK’s radio industry is now excessively concentrated.

The competition that disciplines radio providers has been replaced with oligarchy. Global is not the only company whose structure is principally designed to enrich its offshore owners rather than serve the public interest, but in the UK radio industry, it is by far the largest. Its dominance is bad for listeners, bad for workers and bad for the UK. It should be broken up. 

Byline Times asked Global to respond to these observations, but had not received a reply by the time of publication