Industrial espionage: It's tax deductible

How do you soften the blow when you've had to pay a $100 million fine for spying on your business rival?

You deduct it from taxes.

That's what British Formula 1 race car team McLaren is doing with a penalty it paid for secretly photocopying technical designs belonging to Italian rival Ferrari.

A British tax tribunal has even approved the maneuver. It agreed with McLaren that "spying on rivals is a normal business expense," as BBC Radio 4 presenter John Humphrys phrased it on a recent news program (you can listen here until the link expires).

The fine was levied by Fomula 1's French ruling body, the Federation Internationale de l'Automobile, and not via civil action.

ALL IN A DAY'S WORK

The tribunal decided that it was a business expense "on the basis that it wasn't a statutory fine for breaking the law,"  explained Julian Hedley, a partner at accountancy Saffery Champness during the Radio 4 segment.

"It is an unusual decision," said Hedley. "But they decided in the end it was a commercial penalty designed to affect McLaren and its commercial activities and trade."

The size of the penalty for the 2007 incident has been described in varying reports as between $51 million $100 million.

According to AcccountancyLive, Her Majesty's Revenue and Customs (HMRC - the British equivalent of the U.S. Internal Revenue Service) has not yet decided whether to appeal the decision.

I think that's the first time that anyone here at CBS SmartPlanet has ever cited AccountancyLive. We expose the Internet's hidden corners for you day in, day out. Now if you'll excuse me, I'm going to fasten my bow tie camera, gather up my 1040 form and pay a little visit to NBC to see what they have planned.

Image: Storms via Branchport Library

This post was originally published on Smartplanet.com