McLaren Legally Wrote Cheating Fine Off on Taxes

UK tax officials have ruled that McLarenMcLarenUnited Kingdom, 1963 > present92 models
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broke no UK laws when it wrote the £32 million fine off of its taxes from illegally obtaining FerrariFerrariItaly, 1947 > present233 models
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blueprints. This is either an incredibly clever bending of the rules or a complete perversion of them depending on your outlook. 

The year of the fine, McLaren claimed on its taxes that it lost £34 million (the fine plus other things) as a reduction of gross income and wrote the amount of its taxes. UK tax officials found that questionable and brought McLaren in front of a tax tribunal to plead the case. McLaren won, and the tax authorities appealed. It took until September 7, 2012 for the appeals court to decide, and McLaren won again. That means that although they were fined by the FIA for cheating, they were able to legally write the amount off of their taxes.

The reason is actually quite simple. McLaren's lawyers claim that the fine from the FIA was not actually a fine but was really a commercial deterrent against them and therefore could be written off. The reason for this is that what McLaren did was not against UK law but only against the rules of the FIA. The organization has the right to fine them for breaking the rules, but McLaren is free to write off the fine as a cost of doing business. 

To simplify it, this case works the same way that many sports injuries works. If a player is injured during a football match the other player might receive a red card and have to leave the match, but the player will not be prosecuted for assault. 

The question this case raises is whether the precedent will cause more open cheating in Formula 1. Many of the teams are headquartered in the UK. If an FIA fine can simply be written off on taxes, will it make cheating acceptable?

For a much closer reading of the case make sure to read this lawyer's analysis or you can read the entire decision. 

Source: Terra Nova and Finance and Tax Tribunals UK