McLaren Spygate fine is tax deductible

12/10/2012

Ron Dennis will surely allow himself a wry smile after the British authorities declared that the fine imposed in the wake of Spygate is tax deductible.

Initially set at $100m, the FIA subsequently reduced the fine to $51m (£32m), the reduction set against the loss of revenue, including TV and travel money, after the team's involvement in the scandal that rocked the sport in 2007 which saw it excluded for the season's results and thereby forfeiting all its points.

The British team had petitioned the Her Majesty's Revenue and Customs (HMRC) arguing that the fine should be exempt from corporation tax, a claim that has now been accepted.

"This cost was not one imposed on McLaren, but one which it was contractually obliged to pay under contractual obligations undertaken for the purposes of its trade," said Judge Charles Hellier of the tax tribunal in his summary, "it did not result from the action of an external regulator, but from a body to whose dictates it had agreed to submit as part of its trade and in order to gain income... the penalty was something which arose from its trade, was connected with its trade and was incurred wholly and exclusively for the purposes of its trade."

"McLaren Group is a successful British company, which provides high-quality employment and substantial tax revenue," a spokesman told reporters at Yeongam today. "In 2007, McLaren Racing Ltd was required to pay a penalty, following a breach of the International Sporting Code of the FIA. After consideration, a Government tribunal has found that such a contractual penalty is tax-deductible. As a UK-registered company, McLaren will continue to comply with all relevant legislation."

Despite last month's ruling, HMRC has the option of considering an appeal.

Trebles all round in Woking?