From: Chris Owen Newsgroups: alt.religion.scientology Subject: Scientology is tax-exempt in England! Date: Wed, 28 Jan 1998 21:28:54 +0000 Distribution: world Message-ID: NNTP-Posting-Host: lutefisk.demon.co.uk X-NNTP-Posting-Host: lutefisk.demon.co.uk [193.237.135.148] MIME-Version: 1.0 Content-Transfer-Encoding: 8bit Content-Type: text/plain; charset=iso-8859-1 X-Newsreader: Turnpike Trial Version 3.04 Lines: 408 I've now had a look at the files for two of the four Scientology entities currently active in England and one which is now defunct. The picture presented is, frankly, rather confusing (probably intentionally so if Scientology's conduct towards the IRS in the US is in any way typical). It's also produced some real surprises in the case of COSRECI, the Australian corporation which runs Saint Hill Manor - and, as we shall see, much else besides. I'm no accountant, so please forgive any errors I may have made. I'll scan the relevant documents and put them online within the next few days - that way, people more knowledgeable than I can have a look at them too. ======================================================================== Church of Scientology (England & Wales) This was established on 31 July 1996 by a trio familiar to UK SPs - Graeme Wilson, Greg Ryerson and Rachel Ryerson, all senior OSA members at Saint Hill. It was established in East Grinstead, though its address is not Saint Hill Manor as one might have expected - instead, it operates from Scientology UK's solicitors' offices. It has produced one annual return so far (for 1996-97, dated 08/08/97) but has produced no accounts and appears neither have any assets, nor to have handled any money. The clue to its status is given in the initial statement of incorporation, in which COS (E&W) is constantly and rather optimistically referred to as "The Charity". This, evidently, is the body for which Scientology is attempting to gain charitable status from the Charity Commissioners; they submitted an application to this end in December 1996 and I understand the review is still ongoing, no doubt slowed by the considerable quantity of counter-submissions (hehehe). But at the moment it owns nothing and does nothing. Presumably the plan is for this body to gain charitable status and then to offload all the UK assets and orgs into COS (E&W). ======================================================================== Church of Scientology of the United Kingdom A bit of a puzzle, this one. It was incorporated on 25 June 1980 by Peter Morgan, Alistair Gray and Judith Grey. Its corporate address is given as 68 Tottenham Court Road (the London org) and its purpose, rather dubiously, is given as being the use of the chapel at Saint Hill Manor for "worship of the Supreme Being" (Hubbard, maybe!). The veracity of this claim can perhaps be judged by the fact that when Stewart Lamont, the BBC's Religious Affairs Correspondent, visited the chapel in 1985 while he was researching his book "Religion, Inc.", he found the pews covered in thick and undisturbed dust. The puzzle deepens somewhat when one looks to see what COS of UK actually did. It is not recorded as having had any capital, assets, income or business dealings. In 1985 it was declared dormant (there's a legal definition of this, apparently). In 1988, 1989 and 1990 it declared that it did not have to have its accounts audited - this is apparently legal in the case of a dormant company. In 1991, the last AGM voted that no further AGMs would be held, nor further accounts or returns submitted. The entity was finally struck off the register of companies on 25 July 1995 - there are no records of any requests for this, so I assume it was done by Companies House after COS of UK failed to produce any more returns. There's no trace of any accounts between 1980 (incorporation) and 1985 (the beginning of dormancy), which is very odd. COS of UK appears to have owned nothing, received nothing and sold nothing. What was it for? My guess is that it was an abortive attempt to create a UK-based entity for Scientology, along the lines of COS (E&W). The dates of its incorporation and dissolution are perhaps significant. It was incorporated shortly after the repeal of the 1968-80 ban on foreign Scientologists entering the UK and was dissolved almost exactly a year before the incorporation of COS (E&W). ======================================================================== Church of Scientology Religious Education College Inc. (COSRECI) This is the big one: an Australian-based corporation which runs Saint Hill Manor and apparently, much to my surprise, much else as well. It was established on 21 December 1976 in Adelaide, but operates *only* in the UK. This is highly significant, as it turns out that COSRECI is exempted from taxation in Australia - presumably because Scientology is recognised there as a bona fide religion and has been since the mid- 1970s (notice the coincidence of dates). And this apparently enables COSRECI to avoid paying UK tax; its tax liabilities are given in its accounts as nil. This particular Scientology organisation, therefore, is de facto tax exempt. It's almost certainly no coincidence that it operates only in this country, as presumably UK-Australian tax law enables it to escape taxation in either country. So why is Scientology seeking charitable status if it is already effectively tax-exempt? Charities have a number of privileges denied to limited companies, though obviously the rules of their operation are somewhat tighter. But the big advantage of charitable status for Scientology would be political: it would gain "respectability" and, by receiving tax exemption from the British authorities, its goal of gaining the same on continental Europe would also be advanced. I suspect that charitable status in Britain might also confer advantages within the EU. Have any EU states given Scientology tax privileges or charitable status? PROPERTY -------- It's no surprise, then, to find that COSRECI not only owns Saint Hill Manor but much else besides, including property elsewhere in West Sussex and the orgs at 68 Tottenham Court Road, London; 258-260 Deansgate, Manchester; and 41 Ebrington Street, Plymouth. Remarkably, these have all been mortgaged (on 19 February 1987 and again on 18 January 1988) for no less than US $4,645,000. The mortgagees are the International Scientology Religious Trust - of which I've never heard, and I can find no record - which is based at Messrs. Whitman & Ransom, 11 Waterloo Place, London SW1. Sounds like a law or accountancy practice; I'll check it out. The trustees of the ISRT are given as Carl Heldt (any relation to Henning Heldt, the GO criminal?), Maureen Brigatti and Tom Woodruff. More extraordinary still, Saint Hill Manor and 68 Tottenham Court Road had been mortgaged earlier, on 7 January 1982, to secure £1,550,000 (the Manor) and £320,000 (68 TCR). The mortgagee was Church of Scientology of California (CSC) - which had been dissolved on 31 December 1981. How could CSC possibly have been the creditor in this mortgage if it no longer existed? ACCOUNTING ---------- Strange financial dealings aside, COSRECI's income and expenditure statements reveal an interesting picture. The organisation seems to be a little sloppy in filing its accounts. I found none for the period 1976-81; COSRECI was in fact sent a warning dated 9 September 1980 telling it to submit its accounts forthwith. This it apparently didn't do until 1984 (!), and even then appears to have provided only a "Statement of Affairs at 13 December 1982" with no figures of income or expenditure. Likewise, its 1984 accounts were not filed until 1987. I'm somewhat at a loss to explain this pattern, particularly as it's also visible for Narconon - the only Scientology entity to have been given charitable status - which has not filed any accounts since 1994, despite its very active status (trying in 1996 to buy a mansion in Yorkshire for £175,000, but failing after being gazumped by the locals). What advantage could Scientology gain if it was deliberately delaying its returns to a point where it could cause serious trouble? I'm inclined to think that it's simply a product of sloppy management, though I recall that Sir John Foster's 1970 report ("Enquiry into the Practices and Effects of Scientology" - see http://www.demon.net/castle/ audit/) also cited a large number of instances where Scientology entities had failed to file statements of accounts. There are no filed accounts for 1989, 1990, 1991 or 1992 (though the figures from the latter are given on the 1993 accounts for comparison). I suspect that the accounts *have* been submitted but, for whatever reason, have not made their way onto the Companies House files. I'll check this point at a later date. SUBSIDIARIES ------------ COSRECI's records also reveal the existence of two subsidiary companies: Nesta Investments Ltd and S.O.R. [Sea Org Reserves] Management Ltd, which was liquidated in December 1988. Its purpose was described, rather opaquely, as "provision of administrative and financial services for overseas organisations". A very similar new entity was "acquired" in 1993 - SOR Services (UK) Ltd, whose role is described as "provi[sion] of bookkeeping services". Both of these bodies (and COSRECI itself) are mentioned in the secret IRS-Scientology agreement of 1993, which requires them to "operate in a manner that does not jeopardize the tax-exempt status of any Scientology-related entity so recognized." The incorporation date of SOR Services (UK) Ltd is so close to that of the IRS-Scientology agreement that coincidence seems improbable. For 1983 through to the last year of accounts, 1995, Nesta has held 180,000 £1 ordinary and 3 "non-cumulative preference" £1 shares in COSRECI. The old SOR, which the 1985 accounts disingenously claim was "acquired 12 November 1985", held 100 £1 ordinary shares, while the new 1993 version has 1000 of the same. And that is as much detail as is given. The accounts declare: "The College financial statements do not include the results of the subsidiary companies as the Trustees do not consider that the additional expense involved in the preparation of consolidated accounts would be of any benefit to the members." Yeah, right. I think I'll investigate Nesta and SOR a little further. But there's no evidence of large-scale cash flows between COSRECI, Nesta and SOR: the amounts passing between them haven't exceeded £11,000. It's hard to imagine what the purpose of Nesta and SOR could be; it may be just about possible to imagine SOR as an accountancy service of sorts, but what advantage could COSRECI gain from Nesta holding 180,000 of its 181,000 shares? And who controls those shares? CASHFLOWS --------- COSRECI's statements of income and expenditure reveal a steady growth in income since 1982 (all figures are in UK pounds; to convert approximately to dollars, multiply by 1.6): INCOME: 1982: 1,409,990 1983: 2,956,999 1984: 2,630,541 1985: 1,932,796 1986: 2,781,407 1987: 3,036,181 1988: 5,262,466 1989: ? 1990: ? 1991: ? 1992: 4,935,704 1993: 5,026,035 1994: 6,015,363 1995: 5,678,380 There's no explanation of why there should have been a 52% jump in income between 1982 and 1983, nor an equally remarkable 42% jump between 1987 and 1988; the accounts state that no breakdown in income by geographical region will be given. (This statement, incidentally, acknowledges COSRECI's direct ownership of regional orgs. Presumably it owns missions such as Newcastle, Sunderland and Hartlepool, of which I have found no trace as independent entities). The anomalously low level of income in 1982 may be related to the mass purges and defections of that year, which accompanied David Miscavige's takeover of Scientology. It's also noteworthy that COSRECI's income has increased by a mere 8% between 1988 and 1995, compared to a 42% increase between 1982 and 1988. Must try harder! I wonder if this marked slowdown might have been a factor behind the recent steep rises in Scientology's so-called "fixed donations". Maybe they were an attempt to get the income stat rising again. The expenditure figures are likewise interesting, showing that COSRECI has frequently spent far more than it has earned - in the process racking up huge deficits: EXPENDITURE: 1982: 2,767,995 1983: 2,750,005 1984: 3,973,042 1985: 2,332,860 1986: 3,318,111 1987: 2,147,901 1988: 4,717,092 1989: ? 1990: ? 1991: ? 1992: 6,661,193 1993: 4,840,122 1994: 5,523,557 1995: 5,012,722 SURPLUSES/DEFICITS FOR FINANCIAL PERIOD: 1982: -1,284,687 1983: -189,048 1984: -1,833,815 1985: 83,054 1986: 869,146 1987: 635,532 1988: 206,880 1989: ? 1990: ? 1991: ? 1992: -1,886,418 1993: 33,497 1994: 328,641 1995: 529,949 I found exactly the same sort of pattern in the records of Narconon, held separately at the Charity Commission. Not a coincidence, I'm sure. The Narconon records did not state where the money was going, but those of COSRECI do, in broad terms: AMOUNTS DUE TO ASSOCIATED CHURCHES: 1982: 3,215,983 1983: 2,286,608 1984: 2,030,051 1985: 3,271,398 1986: 6,157,295 1987: 3,135,009 1988: 4,338,779 1989: ? 1990: ? 1991: ? 1992: 8,809,208 1993: 9,256,214 1994: 9,292,317 1995: 9,390,808 This is almost certainly money going (eventually) to the RTC, the body headed by David Miscavige which licenses the use of Scientology trademarks and materials - for a hefty fee. It is noteworthy that the Narconon accounts show exactly the same pattern in what are referred to by Narconon as "payments to creditors". The payments remain at a relatively steady level for most of the 1980s, apart from a peak, but then escalate massively in the early 1990s. Narconon's last accounts (1994 - very naughty indeed) show it to be running a large and growing deficit. It's also noteworthy that the amounts paid to "associated churches" appear to have little relation to the actual amount of income generated by COSRECI. For example, between 1982 and 1988, COSRECI income rose by 42% while payments to "associated churches" rose 25%. But between 1988 and 1995, COSRECI income rose only 8% while payments to "associated churches" rose by a whacking 116%; the amount to be paid in 1995 was 40% higher than the entire yearly income of COSRECI. In other words, COSRECI is paying massively more to its parasitic "sister churches" whilst doing only a small amount of extra business. The huge growth of these payments may well be related to the slowdown in growth - might an RTC "dash for cash" be crippling even flagship orgs like Saint Hill? You will have noticed that despite the huge sums being paid to "associated churches", COSRECI nonetheless has managed to post surpluses of upwards of £500,000 in the latter period of its accounts. Its surpluses and deficits have been significantly influenced by its interest receivable and payable: INTEREST RECEIVABLE: 1982: 74,938 1983: 11,507 1984: 2,861 1985: 925,677 1986: 10,165 1987: 9,639 1988: 4,379 1989: ? 1990: ? 1991: ? 1992: 9,355 1993: 12,572 1994: 35,580 1995: 11,929 The remarkable 1985 figure is unexplained. The payable interest figures are more explicable, relating to "bank overdrafts and other loans" payable either "within 5 years, other than by instalments" or "within 5 years by instalments". Most of the money payable falls into the first category. INTEREST PAYABLE: 1982: 1,620 1983: 407,549 1984: 494,175 1985: 442,559 1986: 342,607 1987: 264,677 1988: 348,133 1989: ? 1990: ? 1991: ? 1992: 165,308 1993: 161,771 1994: 175,737 1995: 171,289 This suggests that a lot of borrowing occured in 1983, the debt since being progressively reduced. The later figures also give the average number of employees of COSRECI and their wage bill, as follows: NUMBER OF EMPLOYEES AND WAGE BILLS: 1992: 453 £614,726 1993: 444 £596,492 1994: 445 £850,452 1995: 428 £667,826 The average wages per employee are incredibly low, but seem to have increased somewhat in the long term: AVERAGE WAGES PER EMPLOYEE (per week): 1992: £26.09 1993: £21.50 1994: £36.75 1995: £30.00 No wonder the London org advertises for new members with the oh-so- enticing slogan "Low Pay, High Prospects". The near-70% pay rise in 1994 may have been a belated recognition that the average salaries were worth considerably less than state unemployment benefit. Incidentally, if high inflation has forced Scientology to increase the cost of services twice by a cumulative 10% at the end of last year, how come it's apparently not affected wages? It looks like the real value of the wages is actually falling, which suggests that (in this respect at least) inflation is *helping* Scientology - though not its unfortunate employees. A thought occurs to me: a while back, someone posted a timetable of duties at Saint Hill which I think showed a 15 or 17 hour day, or something equally ridiculous. If, let's say, Saint Hill staff have to work 15 hours a day, that means that on the 1995 figures they would be earning a mere *40 pence* an hour - and that's only if they were on a 5-day week. If it's every day of the week, that figure falls to only 28 pence per hour. I don't know whether COSRECI and Scientology in general will be affected by the proposed national minimum wage, but if that is set at around £3.00 an hour - the figure most mentioned by the press - that will have a massive effect on Scientology's pitiful wages bill. In most firms, the bulk of the expenditure - maybe 70-80%, I believe - goes on the employees' payroll. For Scientology, the figure is only 12.5%. That says a lot about how Scientology treats its workers. I hope to have the documents scanned by the start of next week. Look out for them on the Web - I'd love to see what the ARSCC Finance Committee makes of them. -- | Chris Owen - chriso@lutefisk.demon.co.uk | |--------------------------------------------------| | WORLD'S BIGGEST SINCLAIR ARCHIVE - | | http://www.nvg.unit.no/sinclair/planet/index.htm |