An investigation by the BBC has apparently revealed that Formula One boss Bernie Ecclestone "has avoided a potential £1.2bn tax bill as a result of a secret deal with HMRC," the UK's tax authority. However, in fact this doesn't seem to be the case according to in an article in Forbes magazine written by Christian Sylt.
Given the fact that Ecclestone's family have amassed more than £2.4bn ($4bn) from F1 it is no surprise that they have been investigated by HMRC over the years. The BBC report is about the channel's current affairs programme Panorama which is tonight due to broadcast an episode devoted to Ecclestone.
The programme claims that HMRC "spent nine years investigating the Ecclestone family's tax affairs before offering to settle in return for the payment from the family trusts in 2008." It quotes one of the lawyers who helped run the Ecclestone family trusts, Frederique Flournoy, who says that "in summer 2008, the Inland Revenue offered to conclude the matter if we paid £10m. We decided to pay up."
Panorama draws the conclusion that as a result of this allegedly secret deal, Ecclestone "avoided a potential £1.2bn tax bill." The first point made by the Forbes article is that the deal was far from secret. In fact, it was revealed in the most public of places, a court room.
Last year Ecclestone was sued in London's High Court by German media rights firm Constantin Medien which claimed that it lost out when F1 was sold to its current owner the private equity firm CVC in 2006. Constantin claimed that Ecclestone and his family's Bambino trust paid a £26.2m bribe to steer the sale to CVC. The recipient of the money was Gerhard Gribkowsky, the banker in charge of the sale, and Constantin believed that CVC was Ecclestone's preferred buyer as it had agreed to retain him as the boss of F1.
Constantin claimed that if the sale to CVC had not been engineered then other buyers would have come forward and offered more than the £1.2bn paid by CVC. Constantin had an agreement to get a share of the proceeds which is why it claimed to have lost out as a result of the alleged bribe.
The verdict did not go in Constantin's favour, as the judge ruled that, in fact, it did not suffer any loss, but the case gave a great deal of insight into Ecclestone's finances. As the following transcript shows, under testimony on 6 November 2013 Ecclestone confirmed that he had been investigated by HMRC from 1999 to March 2006 and that it had also investigated his ex-wife Slavica from the end of 1999 to March 2008. Philip Marshall, QC for Constantin, put it to Ecclestone that Slavica "ended up with a settlement where she paid GBP 10 million. Do you remember that?" He replied "yes. And she reminded me of it."
So, according to the court transcript, in addition to the £10m deal not being secret it was also not made by the trust but by Ecclestone's ex-wife Slavica. These two points seem to contradict the BBC's report but you might say that they are no big deal. You might be right but you would be hard pressed to say the same about the third point.
The BBC report claims that as a result of the £10m payment Ecclestone has avoided being chased by HMRC but in fact it is doing just that right now. In March last year Pitpass revealed that in 2012 HMRC launched an investigation into Ecclestone and, according to F1 company documents (which can be seen here:), its purpose "is to identify if there are any amounts of underpaid tax." Mysteriously this is not mentioned in the BBC report.
In January this year Ecclestone told Pitpass that the HMRC investigation is still going on and said "they could still come after me now. It is 100% a real risk." He added that "it is logic. They will see money. They will see the fact that if they do have a go at me I have got the money to pay." Accordingly, it does not seem that he "has avoided a potential £1.2bn tax bill as a result of a secret deal with HMRC."
Perhaps the Panorama programme will fill in the blanks to explain the apparent contradictions above but if not then one is left wondering what is the origin of this confusion. To be in a position where we could get to the bottom of it we need to look at the origin of the Ecclestone family's wealth.