The Commissioners for HM Revenue and Customs v McLaren Racing Limited
| Jurisdiction | UK Non-devolved |
| Judge | Mr Justice Warren,Judge Sinfield |
| Neutral Citation | [2014 UKUT 0269 (TCC) |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Subject Matter | Tax,17 June 2014 |
| Date | 17 June 2014 |
| Published date | 01 December 2016 |
[2014 UKUT 0269 (TCC)
Appeal number FTC/93/2012
CORPORATION TAX – whether penalty imposed by Formula One governing body
for breach of its non-statutory code deductible in computing profits to be charged to
corporation tax - held no - appeal allowed
UPPER TRIBUNAL
TAX AND CHANCERY CHAMBER
THE COMMISSIONERS FOR
HER MAJESTY’S REVENUE AND CUSTOMS Appellants
- and –
MCLAREN RACING LIMITED Respondent
Tribunal:
Mr Justice Warren, Chamber President
Judge Greg Sinfield
Sitting in public at the Royal Courts of Justice, The Rolls Building, Fetter Lane,
London EC4 on 9 and 10 December 2013
Akash Nawbatt and Christopher Stone, counsel, instructed by the General
Counsel and Solicitor to HM Revenue and Customs, for the Appellants
Alun James, counsel, instructed by KMPG LLP, for the Respondent
© CROWN COPYRIGHT 2014
2
DECISION
Introduction
1. The Commissioners for Her Majesty’s Revenue and Customs (“HMRC”) appeal
against the decision of the First-tier Tribunal (Judge Charles Hellier and Tribunal
Member Nicholas Dee) (“the FTT”) released on 7 September 2012 (“the Decision”). 5 The only issue before the FTT was whether a penalty paid by McLaren Racing
Limited (“McLaren”) for a breach of Article 151(c) of the International Sporting Code
(“ISC”) of the Federation Internationale de l’Automobile (“FIA”) was deductible by
McLaren in computing its taxable profits. The FTT allowed McLaren’s appeal by
casting vote of the Judge. 10
2. For the reasons given below, we consider that the £32 million penalty paid by
McLaren was not an allowable deduction. Accordingly, we allow HMRC’s appeal.
Facts
3. The facts found by the FTT are set out at [45] – [78] of the Decision. The
findings of fact were not disputed by either party, although HMRC criticised several 15 of the conclusions drawn by Judge Hellier based on those facts. We summarise the
relevant facts below.
4. McLaren is a well known Formula One motor racing team. It designs,
develops, manufactures and races Formula One cars at grand prix events throughout
the world. McLaren derives its income from sponsorship, advertising and payments 20 under the Concorde Agreement.
5. The Concorde Agreement is an agreement with the other Formula One teams,
the FIA and Formula One Administration Limited (“FOA”), a company engaged in
the promotion of the Formula One World Championship. The Concorde Agreement
provides, among other things, for the commercial exploitation of broadcasting rights 25 and other commercial activities in relation to Formula One which generate income for
those involved. Under the Concorde Agreement, the Formula One teams agreed to
accept the Sporting Regulations of the Formula 1 Championship laid down by the FIA
which were deemed to be imported into the ISC.
6. The ISC is the document by which the FIA prescribes rules for the conduct of 30 its motor sports events. The ISC takes effect as an agreement among the FIA’s
members which are national and other motoring associations in different countries.
The ISC confers on members the right to issue licences to participate in motor sports
competitions such as the Formula One World Championship. By accepting a licence,
the holder agrees to be bound by the provisions of the ISC. McLaren submitted an 35 entry form for the 2007 Formula One World Championship on 3 November 2006. In
that form, McLaren expressly agreed to be bound by and to observe the FIA’s 2007
Sporting Regulations and the ISC.
7. Chapter XI of the ISC provided for penalties for breach of the code. Regulation
153 provided for a scale of penalties ranging through reprimand, fines, time penalties, 40
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