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McLaren win 'spygate' tax deduction case

McLaren have succeeded in getting their fine for the 2007 'spygate' scandal allowed as a tax deductible cost, potentially saving the team millions in corporation tax.
McLaren have won the right to claim the £32m fine they received from the 2007 'spygate' scandal as a tax deductible cost against their corporation tax liabilities for that year.

"In 2007, McLaren Racing Ltd was required to pay a penalty, following a breach of the International Sporting Code of the FIA," said a statement from the team. "After consideration, a Government tribunal has found that such a contractual penalty is tax deductible."

The fine was levied by the World Motor Sport Council (WMSC), after McLaren was found to be in possession of a confidential 780-page Ferrari dossier. Then-McLaren designer Mike Coughlan was banned from F1 for two years and sacked by the company for his part in the scandal; he's now returned to the support in 2012 with Williams.

HM Revenue and Customs initially refused McLaren's bid to have the fine be declared as tax deductible, but the Woking company insisted that the fine was a legitimate expense of doing business in F1.

The HMRC resisted this, claiming that the fine could not be considered to be a legitimate expense: "The penalty arose from McLaren's interference with Ferrari's intellectual property," argued the HMRC's legal team. "Such interference was not part of McLaren's trade or incidental thereto."

But the tribunal this week ruled in favour of McLaren, although the two-man tribunal was split and McLaren only won because of the views of the presiding judge in the case.

The verdict outraged one lobby group, the Tax Justice Network, which campaigns for more openness in the tax system and closing of loopholes. Their director John Christensen told the media after the ruling: "From a taxpayer point of view it's extraordinary a company that has been found guilty of cheating can have the fine deducted from their bill so the tax payer loses out as a result of their activities."

The HMRC has the right to appeal and has indicated that it might do so. But according to Ren Reynolds, an expert in legal and ethical implications of technology looking into the ruling and consulted by Crash.net after the decision was made public, it doesn't look as though the HMRC has much chance of succeeding.

"McLaren's legal team made the kind of straight down the line argument that one would expect," said Reynolds. "And it worked - though by a split decision - so let's not knock it."



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Taipan

October 12, 2012 8:40 PM
Last Edited 1513 days ago

WHAT? How the fk can a fine for breaking sporting laws be tax deductible? Can the rest of us now claim parking tickets, speeding fines etc as tax deductible? Bonkers!



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