F1 team McLaren denied tax relief for fine

ONE OF FORMULA ONE’s most successful teams McLaren has been told a £32m fine imposed by the sport’s governing body FIA is not tax deductible.

The fine was imposed in 2007 for breaching the FIA’s code after it emerged the team was caught trying to spy on rival Ferrari, according to an investigation.

McLaren took legal action after HM Revenue & Customs (HMRC) disagreed that it could deduct the fine in computing its taxable profits. However, a tax tribunal has now supported HMRC’s view.

A first-tier tribunal ruled the penalty was tax deductible. However, the upper tribunal has now supported HMRC’s appeal against that decision by ruling the penalty was not incurred wholly and exclusively for the purposes of McLaren’s trade and so was not an allowable deduction for tax.

HMRC director-general for business tax Jim Harra said: “We’re very pleased the Upper Tribunal agrees that the fine should not be given tax relief, which supports our view that most fines are not allowable as deductions against trading income.”

“This case shows that we won’t hesitate to go to court to make sure the right tax is paid.”

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