Akash Nawbatt and Chris Stone act in McLaren tax appeal

The First-tier Tribunal (Tax Chamber) has given its decision in the appeal of McLaren Racing Limited against HMRC's decision that a £32m penalty imposed on and paid by McLaren was not deductible from profits for the purposes of corporation tax. The fine was imposed on the Formula 1 team by the Federation Internationale de L'Automobile as a result of the "Spygate" affair involving theft in 2007 of Ferrari's confidential information.

The Tribunal was divided with Tribunal Judge Hellier exercising a casting vote as the presiding member. He decided that the possession and dissemination of Ferrari's confidential information within McLaren's organisation was for the purpose of McLaren's trade and that the fine was deductible. The view of the other Tribunal member was that the penalty was imposed “because the conduct of McLaren fell way outside any normal and acceptable way of conducting their trade” and was not deductible. Akash Nawbatt and Christopher Stone acted for HMRC, which has until 2 November to decide whether to appeal to the Upper Tribunal.

The judgment has obvious application to other sports because any fine imposed by a sport's governing body (for example by the FA for racist abuse or by the UCI for doping) would, if this ruling were correct, potentially be deductible. It is also likely to be relevant to penalties imposed by professional and other regulatory bodies.

The case has attracted significant media interest, being discussed on the Today programme.

See also:

The Independent

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