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Drive-through penalty

A steer on the Upper Tribunal decision in McLaren Racing


  • The Upper Tribunal decided a £32m penalty was not an allowable expense.
  • The penalty would not be deductible for the reasons outlined by Lord Hoffmann in McKnight.
  • Deliberately flouting the ISC rules could not be viewed as part of McLaren’s trade.
  • Wrongful obtaining of information was not an activity of trade just because it was carried out by an employee.

The Upper Tribunal (Tax and Chancery Chamber) handed down its decision in the McLaren Racing Ltd appeal on 17 June 2014. The judge reversed the First-tier Tribunal decision from March 2013 and awarded the winner’s garland to HMRC.

The court decided that based on the facts the First-tier Tribunal should have concluded that the activities that gave rise to the penalty were not carried out in the course of McLaren’s trade.


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