Tag Archives: Formula 1

Sport Does Not Have Probity and Trust at Heart – Guest Post by Carl31

The FTT verdict is out!!

…no not that one, the one recently that found in favour of McLaren over HMRC, and which decided, apparently, provided you are under the jurisdiction of HMRC, that if the governing body of the sport you participate in fines you, it is tax deductible.

Please see

http://www.independent.co.uk/sport/motor-racing/mclaren-win-tax-verdict-over-spying-scandal-8208660.html

for a brief report.

(Below I mention some sportspeople and companies, and offer some discussion on a ruling. For clarity, I do not suggest that any person or company or party acts or acted with anything other than utmost integrity, and I do not suggest any wrongdoing other than what is already publicly known).

My understanding of this case is :

Past cases, I guess, will have made distinction between ‘commercial losses’ and ‘penalties imposed for breaches of the law’ that occur while a company is trading. So generally a number of types of business or commercial loss that eat into profit, or negate it, are deductible, but losses due to penalty for breaking the law aren’t.

But, when the company is involved in sport, the losses incurred due to breaking the law of that sport, rather than the law of the land, are deductible. It would seem that these losses are deemed as being under the heading ‘commercial losses’.

The taxpaying company argues that the fine imposed is set as a business cost that reduces profit. Just because this cost is a fine, that has come about due to what is judged as contravention of the rules of the sport participated in, does not affect the fact that it is still a business cost. It is still a cost “wholly laid out or expended for the purposes of the trade or profession”, (Income and Corporation Taxes Act 1988)(TA). Continue reading

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