Formula 1 may face EU probe over tax deal with Revenue

FORMULA One could be on track for a tax investigation by the European Commission after research revealed that it has avoided paying at least $500million (£400million) over the past decade in an agreement with HM Revenue & Customs.

F1 is based in London and in the year to December 31, 2015 its parent company Delta Topco made underlying profits of $463.6 million on $1.7 billion of revenue. However, an investigation by ITV News revealed that it paid just $6.5million in corporation tax.

Delta Topco is based in Jersey and its offshore subsidiaries have given huge loans to the UK-based companies which generate F1’s profits. These companies pay hundreds of millions of pounds of interest on the loans to their offshore counterparts pushing them into a loss on paper and giving them a tiny tax bill.

The profits are shifted offshore in interest which ends up in Delta Topco. As it is based in Jersey no corporation tax is deducted there either. The tax scheme is part of a perfectly legitimate practice known as transfer pricing – the model used by global groups such as Amazon and Apple.

It has fuelled concerns that the EC could impose massive fines on F1 as it did in August when it fined Apple a record €13billion over transfer pricing in Ireland.

The EC has refused to rule out launching a tax investigation into F1 and when asked whether it will look into its affairs a spokesperson said: ‘We cannot speculate on any possible future investigations on tax state aid cases.’

Chas Roy-Chowdhury, head of taxation at the Association of Chartered Certified Accountants said: ‘The climate has obviously changed.’ The EC would not be able to rule on F1 once the UK has left the European Union.