Ecclestone denies ‘record £1bn tax dodge’

F1 Fanatic Round-up

Posted on

| Written by

In the round-up: Bernie Ecclestone denies reaching a settlement with Inland Revenue to settle a tax bill of more than £1.2 billion by paying £10 million.


Your daily digest of F1 news, views, features and more.

Ecclestone avoids potential £1bn tax bill (BBC)

“It may be the biggest individual tax dodge in British history, and is legally watertight provided Mr Ecclestone did not set up, or control, the trust.”

Ecclestone denies deal with HMRC (The Guardian)

Bernie Ecclestone: “The Revenue investigates you and if they find out something is wrong they say ‘This is wrong and you should have paid this amount’ and you pay it.”

PCS slams secret deal on tax (Public and Commercial Services Union)

“A PCS HMRC spokesperson said: ‘The irony is not lost on us or our members who see one of the richest people in Britain dodging his tax on the same day as we are being forced to ballot our members in HMRC on industrial action.'”

‘More to come from Mercedes’ (Sky)

Lewis Hamilton: “The Red Bull is very, very fast through the high-speed, which tells me they maybe have a little bit more downforce than us. Last year was a massive gap between how much downforce they had [compared to what Mercedes had]. We’ve definitely closed that up but I think we can do a better job, we can do more.”

Lotus says money troubles exaggerated (Autosport)

Gerard Lopez: “I know there are teams running at 700 people. We don’t, we’re running at 470, which is substantially more than over half the teams here.”

China 2014 – race edit (F1)

Video highlights from the Chinese Grand Prix.


Comment of the day

AldoH enjoyed yesterday’s On This Day video of Niki Lauda’s win in the 1974 Spanish Grand Prix:

What struck me was the surroundings. OK, Jarama was a awful place to have a F1 race. You can see that there are no stands, the cars are parked less that 100 meters from the track and, beyond the craziness of the pit lane, you can see people everywhere. Footage from other races in those years show a similar scenario: lots and lots of people near the cars.

Compare that to F1 today. The pit lane is clearly a safer area, almost clinical. But the people, the racing fans, are nowhere to be seen anymore. The area between the cars and the spectators is just huge. Sometimes you get a glimpse of the fans, in particular when is raining and the TV shows them trying to cover.

To me, this shows very clearly how we moved from races to be seen and enjoyed in person to spectacles organized and planned for TV cameras. The ‘idea’ of a race, the ‘representation’ of a race is now the real stuff; at the track, if the stands are empty we won’t probably notice. I can say the same from the Olympics Games. As a reporter I covered several Games and when I sat in front of TV to watch the Chinese Games en 2008 I immediately noticed that the real stuff is nothing like that. London 2012 took the tendency even further. People see a planned representation of something, and most believe that what they see is the real thing.

Now we can see on the screen the amount of petrol each car is consuming, the amount of stored kinetic energy and the G-forces acting on the driver’s neck. But I really ask myself if some of the magic is lost.

From the forum

Happy birthday!

Happy birthday to Alvino!

If you want a birthday shout-out tell us when yours is by emailling me, using Twitter or adding to the list here.

On this day in F1

The Zolder circuit held the Belgian Grand Prix for the final time 30 years ago today. Michele Alboreto won the race for Ferrari ahead of Derek Warwick and Rene Arnoux.

Keke Rosberg had worked his way up from twentieth to third by the penultimate lap, only to run out of fuel and be classified in fourth.

Image © Jamey Price / James Moy Photography

Author information

Keith Collantine
Lifelong motor sport fan Keith set up RaceFans in 2005 - when it was originally called F1 Fanatic. Having previously worked as a motoring...

Got a potential story, tip or enquiry? Find out more about RaceFans and contact us here.

57 comments on “Ecclestone denies ‘record £1bn tax dodge’”

  1. Yet another revelation about Ecclestone that has me very concerned about his status as the most powerful man in our sport.

    And as a bit of a political aside, if only British society treated super-rich tax avoiders like Ecclestone with the same disdain that they do people claiming financial benefits from the government.

    1. It’s the same in every country. If you are a mid-class citizen, God help you if you end up not paying bills for a few months. You gonna get all kinds of institutions on you and might end up having your stuff claimed. And most people in those situations simply don’t pay because they don’t have any money left.

      But if you are super-rich and screw over a country for hundreds of millions, even though you can afford billions, then no problem. You’ll make some deal.

      1. It the same everywhere mate.

        I know of businessmen who make millions a year but they pay less tax than me!!!

        Its very simple. Why do they have Tax Lawyers and Accountants? Because the laws have loop holes in them, that what these guys get paid the big bucks for. Legally reducing your tax is easier than you think!

        1. that’s why we have PAYE. It takes the option out of our hands,
          unless we spend a lot of effort.

        2. @jaymenon10 They pay less tax than you, or less percentage of their income than you? I suspect they are still paying way more in dollars than you.

      2. @trotter Usually the super-rich got there by being very smart and very entrepreneurial and by forming massive companies that employ thousands. So I reject the notion that they screw countries over for hundreds of millions. They are an integral ingredient to the well being of a country.

        I agree with the likes of capitalists such as Kevin O’Leary. There has to be incentive for all of us to take great ideas to market with a chance of succeeding financially, and without it costing 50% or more in taxes which is what a normal employee of a company pays if he/she earns a few hundred thousand annually but has no skin in the game. If multi-millionaires and billionaires had to pay half out in taxes as a ‘reward’ for employing thousands, then they’d just pick a time when they could retire, and just fold everything up and go lay on a beach. They have to be rewarded far moreso if we want them to continue to use their great abilities to keep growing their firms and their numbers of employees and their countries’ economies. Generally, why would anybody bust their butt and put everything on the line to make big moves in business for little gain? There should be much more reward for taking much bigger risks and contributing massively to employment and the economy. Doesn’t mean millionaires and billionaires pay nothing…just a smaller percentage than straight employess who are taking no risk, which still amounts to millions in actual dollars more than straight employees contribute…straight employees who would also jump at any chance to pay less tax when those options comes up to them if they buy a rental property, or have a child, or are independent sales reps that can write off their costs of doing business.

        1. Tax or no tax, contributing or not contributing the society… It doesn’t matter. He will die anyway, he can’t dodge that.

        2. Actually it turns out that most rich people are rich not because they worked hard, but because they were lucky enough to be born into the right families. Thomas Piketty’s new book confirms that this has not only been true for at least the last 30 years, but is getting worse – wealth is concentrating into fewer and fewer hands.

    2. £1bn is a ridiculous amount to tax one person anyway.

      And as a bit of a political aside, if only British society treated super-rich tax avoiders like Ecclestone with the same disdain that they do people claiming financial benefits from the government.

      The difference is Bernie actually works for his – granted mostly ill-gotten – money, the people that attract disdain are the ones that are perfectly capable of taking care of themselves, but instead decide to sponge off the hard work of others, and we make it too easy for them.

      1. Well, good to know that contempt for the poor isn’t limited to the U.S.

      2. GB (@bgp001ruled)
        29th April 2014, 3:32

        man! wow!

      3. yes, because jobs are everywhere around to be found for anyone not too lazy to get up, right @george?

        If you say Bernie “works for his money” would that be the work put in by track owners building the tracks and maintaining and improving them, building and operating race cars, and driving them? Or just being clever enough to get all the cards that matter in one hand, offer to take care of it better than has been done, being at the right time and place to jump onto widening TV coverage of sports,and playing out the sides against each other to make a fortune from it yourself?

        I do agree that in doing what he loves to do Bernie has moved F1 forward, but that was ages ago. By now its starting to show that his “system” takes the value out of the sport. And a reasonable reward for that is fine. But not Billions so his daughters can have their dogs getting cosmetical surgery and buy the biggest homes in the US just because they can.

        1. @bascb @george The problem is, you’re both right.

          Whilst Ecclestone is a shark who got into a position of power and is abusing the sport, he is a man employed by a company and is paid at a rate they deem acceptable. That he and his ex-wife lucked into a system that allows them to generate exponentially more wealth than they pay in tax, well done them – i’m sure we’d all do it if we had the means.

          Bernie’s ‘system’ hasn’t ruined the sport – it was the sale of it to a hedge-fund company designed for maximum returns for its investors that basically sent it up the creak without a paddle.

          1. Bernie’s ‘system’ hasn’t ruined the sport – it was the sale of it to a hedge-fund company designed for maximum returns for its investors that basically sent it up the creak without a paddle.

            I regard that as part of the system though @optimaximal. The deal is Bernie keeps increasing turnover, enabling for a bigger cash grab, and in turn the money men leave him do his own thing and pay him a handsome sum for it.

            The money that made Bernie rich is not what he is earning now with his job for CVC (good job doing something he loves to do and getting paid to do so) but the money made with the original sale of his assets to the first buyout guy (was that Kirch Media?).

        2. @bascb
          I wasn’t suggesting everyone on benefits is worthy of disdain, just the ones that choose to selfishly play the system as an alternative to finding work.

          I didn’t mean to suggest Bernie was a saint either, they both play the systems at different ends of the spectrum, and the people in the middle are the ones that bear the burden.

          1. The thing is, of those on the “top end” of wealth they are a huge percentage of them (us?) profiting from the system, at the other end, people “selfishly playing the system” are a far smaller part. Most just struggle to make do with what they can @george

    3. Paul (@frankjaeger)
      29th April 2014, 1:37

      @magnificent-geoffrey +1 Totally. In most tabloids you hear of these small-time tax thieves, who are sometimes effectively victims of circumstance and poverty, and admittedly sometimes wrong doers, hung-drawn and tarred every other day. It’s funny when people who really skank millions off a governmental body and get served soft justice behind a shield of lawyers and aristocrats

    4. Bernie Ecclestone does contribute indirectly a lot to the economy by providing jobs for working-class citizens and generating TV revenues income. So that’s why there is a degree of leniency.

      1. Why? If you make a small contribution to the economy and make a small amount of money off that, then a fraction of that small amount goes to the government that provides much of the infrastructure that makes your contribution possible. If you make a big contribution and make a large amount of money off it, you still owe your share of taxes. If the amounts of tax involved seem colossal, it’s only because the amounts he gets for himself is even more enormous.

  2. “The Revenue investigates you and if they find out something is wrong they say ‘This is wrong and you should have paid this amount’ and you pay it.”

    I would love to believe that, but there have been so many tax avoiders in the UK who settled with HMRC for far less than their full tax bill, it holds less water than a sieve with the mesh removed.

    1. @raceprouk

      Their very logic is flawed. If they find out you’ve been fudging the numbers, you should pay more than the initial sum, because you’ve been caught in a crime. If everyone can just pay up the difference, what’s stopping people from robbing a bank? You can just give it a try, and if you don’t manage to get away with it, you can just give the money back and return to your 9-5 job on Monday.

      1. @trotter here-in lies the intricacies of the argument. Tax Evasion (as in, not paying any tax) is a crime. Tax Avoidance (as in, using various legal and regulatory systems to avoid paying the full amount of tax owed on a sum of money) is perfectly legal, albeit frowned upon when used just to ‘further wealth’.

        Are you telling me if you had a windfall for £X amount that could result in you having to pay an obscene amount of tax, you wouldn’t get it paid into something like a tax-free ISA? That is Tax Avoidance.

        Heck, I’m part of a salary sacrifice scheme at work that means rather than pay a pension, the company pays it on my behalf by reducing my salary. I earn the same amount at the end of the day, but because i’m being paid less salary, I’m paying less PAYE Tax and NI contributions.

        This is Tax Avoidance.

        1. The difference is that the tax avoidance schemes available to you like ISAs and salary sacrifice pensions are clearly defined by rules predominantly set by acts of parliament. The tax avoidance schemes of people like Ecclestone are determined by little more than what they can negotiate on an ad-hoc basis. It would be pretty naive to believe that the result of those negotiations is a fair result for the country as a whole or free from methods of “gentle persuasion” which have no place in fiscal policy.

          1. @w-h I’m pretty sure this whole Bambino thing is strictly controlled by rules – Bernie isn’t allowed to have anything to do with it.

            Whether he did or not…

          2. @optimaximal They may be set by rules, but rules set by private arrangement with HMRC, not rules which apply to all of us equally. When you get a starring role in writing the rules, the fact that they’re still rules isn’t a particularly important detail.

    2. As I saw elsewhere, next time I fill out a tax return I’m just going to make up a bunch of numbers and then take the taxman to lunch.

      1. Yeah good luck with that.

  3. Good Ol Bernie eh?…he’s such a hustler that he even did a deal with the Government!

    I wonder if it was one of his legendary hand shake deals?..haha

    1. He actually does deals with many governments, as he usually insists on guarantees from them that he will get paid his fees for holding races in their countries. He doesn’t always get everything he wants, but I think usually does. Case in point…here in Canada…several years ago when Montreal’s contract was up for renewal BE wanted 50 mill per year guaranteed for 5 years. Canada’s federal and Quebec’s provincial Governments said no. So gone was the Canadian GP. Pressure mounted on BE as Montreal is so popular, and the North American market so important to the big players in F1 that BE had to back down on his demands and I believe he is now guaranteed 25 or 30 mill per year.

      Bit of a digression there, but back moreso to the topic at hand…I don’t profess to know what the bottom line is with BE in terms of what he ultimately pays in taxes, but I do exercise caution around this topic because often the super-rich pay less taxes in terms of PERCENTAGE, but that doesn’t mean they aren’t still paying millions in taxes at the end of the day.

      I also note…at least BE hasn’t moved to Switzerland or Monaco…although perhaps he doesn’t have to…nudge, nudge, wink, wink.

  4. Bernie is actually what Del Boy would have be like if he ever got rich. That’s his level of “legitimate” businesses.
    (I know they did get on few occasions, but get the joke)

  5. I would also like to deny accusations that I avoided a potential tax bill of more than £1bn by settling a long-running HM Revenue and Customs (HMRC) investigation into my affairs for £10m.

    1. Indeed, not a bad thing at all. I love the detail how Bernie “does not get anything” from the trust, but does get 100 million from his ex that goes from the money the Trust pays her. So in effect he does gets money from the trust, but its legal this way.
      No wonder he told the court he likes to remember the divorce part …

  6. Teams working on 700? That’s huge. Does anyone knows how many people F1 2014 employs directly? I think cost cap would hurt Britain’s employment numbers…

    1. Of course, if the barriers for entry were much lower, the smaller teams could staff up, spreading those redundant from the top teams around, potentially boosting the minnows performance at the same time.

  7. Frankly, if I managed to settle a £1bn tax dispute for £10m I’d be over the moon. Fair play to him. He must have some terrific tax accountants.

    Nobody other than entrepreneurs will agree with it but when you create wealth, the last thing you want to do is pay HMRC for the pleasure. PAYE employees are pretty much screwed by the tax system here in the UK.

  8. Ecclestone embodies every stereotype about rich influential people ever used – he is like a comic book version of Gordon Gekko.
    I’m not saying that he is guilty or innocent (that’s somebody else’s job to decide), but to me all the recent revelations go in line with the perception I always had about him.

    1. I’m not sure your analogy of “Real person is comic book version of fictional character” works. :)

      1. Lol, not to mention didn’t Gordon Gekko get busted for insider trading?

  9. So who is Terry to Ecclestone’s Arthur Daley?

    And yes, it is cheaper for the taxman to settle a claim with the uber wealthy because of the court costs if they lose. Happens all the time here in Oz. The taxman will always be legally outgunned by the hired hands of the wealthy.

    1. Exactly. They also know what further they stand to lose if Ecclestone moves his personal wealth off shore.

  10. AldoH’s COTD is a good observation. I hate all those circuits Formula One goes to where the stands are mostly empty – probably due to the fact that the local population can’t afford tickets or simply don’t really know what F1 even is. If nothing else it just seems inappropriate. Places like Interlagos and Monza make up for the soulless venues that have been foisted upon F1 in recent years – venues that simply look like white elephants built by get-rich-quick officials and contractors.
    Hopefully Austin will evolve a heritage like Watkins Glen used to have (COTA is a great track), New Jersey may happen (also a great track) and new additions like Austria should draw a decent crowd. Sadly the street track at Sochi looks flat and boring (remember Valencia?) so not that keen on that event, even if it goes ahead. Even though I’m in Australia (a lot of 10 pm race starts!) it seems odd there is no a French GP these days. France seems spoilt for choice with F1 standard circuits. Surely they could muster up a decent crowd? Speaking from a country where we have one, yes one (sadly temporary) circuit at F1 standard it seems ridiculous from our point of view.

    1. I went to Malaysia this year, my first time at a F1 race. What I didn’t know, and seemingly the vast majority of KL residents didn’t know either, is that the Friday was free entry and you could wander anywhere around the public areas (to the tower grandstand for example) for the entire day.

      Attendance? Very, very low and I didn’t talk to anybody who was there just for the Friday. IF you don’t promote, they don’t attend!

      1. I went to Spa last year and I stayed in Brussels for two days and I did not stop during my stay, however I did not see a single ad in Brussels but an outdoor in very quiet street. Then comes race day and the place is vibrant full of F1 lovers.

        Reading your comment I can see race organizers in KL are trying to fill all those seats but the result would advice even further measures…

        I would love to attend an Italian GP at Monza to feel that atmosphere.

    2. The rumours suggest that Bernie was working on a deal to revive the French GP only for the deal to be derailed by French internal politics.

      Sarkozy’s government were open to the suggestion for the race to be held at Paul Ricard and seems to have been preferred by the teams, but was deemed unsuitable because the circuit is designed to be used as a test track, not for an entire race weekend, and would therefore need major upgrades.

      Following Hollande’s election, the new government supports a return to Magny Cours to be used instead – a circuit the teams dislike because of the poor transport links and poor supporting infrastructure, but appealed to a left wing government because it is a left wing department.

  11. As usual everyone is taken in by the headlines without reading or properly digesting the actual content of the articles. Both articles point out that Ecclestone transferred funds to his wife who then put them into a trust. As a result a potential tax saving of £1.2bn was made. There is no indication that this was or is illegal. In the same way that HMRC is not going to take any readers of this site to court for putting their money in an ISA which is another perfectly legal way of avoiding tax carried out by millions of brits. (I will caveat this by saying this depends on Ecclestone not controlling the trust but there is no solid indication that he did or does).

    The £10m settlement is a completely different matter – it’s a bit cloudy as to whether it is simply payment of underpaid tax or a more general settlement and whether or not it includes any penalty element. Tax affairs for complex structures like this are often not straightforward and therefore underpayment of tax cannot always be met with a penalty on top of the underpaid tax – that is a difference between intentional evasion and ‘unintentional’ underpayment.

    It may be that HMRC might have thought they had a potential case for £20m underpayment but this would be open to multiply legal challenges which would be expensive to pursue for both sides as tax rules generally are not black and white. An agreement to pay £10m could therefore be in the best interests of both HMRC and the trust to end the investigation without incurring the risk of ballooning costs and potential defeat.

    I have to say I have not seen the programme so I’m basing this on the articles only, and even they don’t seem to be able to agree on whether the £10m fine was paid by Ecclestone or his ex-wife’s trust which is a pretty important fact in the matter!

  12. Although Red Bull could simply be running higher wing levels (with the exception of Bahrain) to try and recoup some of the deficit where their car clearly functions well, relative to Mercedes who can afford to run less wing level to blitz the straights with their superior engine package (as of course drag is proportional to v², so the effect of having a higher co-efficient would be more prominent when the car is naturally faster in a straight line anyway).

    1. My logic simply being that a click of downforce would cost Mercedes a relative loss of straight line speed greater than that of Red Bull. So they are not compromised in terms of laptime as much by running higher wing profiles, but will of course be hampered in the race.

      1. @vettel1

        Your logic makes sense to me – essentially Mercedes would get a multiplicative gain from the combination of reducing drag and superior engine.

        On a related note, i often hear things like “Redbull has the highest downforce, therefore best aero package”, when those two things don’t necessarily mean the same thing. Mercedes might have lower downforce but a better downforce/drag ratio, which could exaggerate the difference in engine power. Redbull always seem keen to mention the difference in straight line speed difference at every opportunity, so I would like someone to put that point to them, just to take some of the heat off Renault and put RB in the spotlight for once ;)

  13. Divide the tax figured down to what an average business person may get into. Say you owe 12 thousand but you do a deal and pay 100 pounds. No chance. How the hell did they let that happen unless it would be so expensive to legally prove and they may not win so 10 million was better than nothing?

    1. On the surface, Ecclestone has done nothing wrong. The evidence to take him to court over would need to be watertight before they’d consider going after him, because a team of high-paid lawyers would just drag HMRC over the coals.

      The key thing is, Bernie claims that Gribowsky was going to lie (or tell the truth, semantics) to HMRC, forcing their hand to trigger the investigation. Then he would have to fight it and CVC would likely be forced to definitely suspend him. His entire estate would be scrutinised and many of his other dodgy deals would be up for investigation.

    2. As @Optimaximal mentions, the treasury can get anyone to pay up, but while they can have you provide the proof instead of them having to prove things, they do have to find enough evidence that points towards anyone hiding part of their income or wealth.
      If they can’t dig up enough, they can try anyhow, send nasty letters, put on a bit of preassure, but surely Bernie has good enough lawyers to solve that. So then its a far easier, and likely often more profitable way to just settle, get something for the state but avoid a complicated and expensive court case.

      If Gribowsky would have given some evidence that points towards Bernie hiding over a billion, its quite possible that the HRMC would have investigated further, because they would have seen a better chance of gaining anything from that, and it would have been costly and complicated for Bernie.

  14. Re Cotd… I’m sure some of the magic has been lost from the 70’s, but I’m not sure that was avoidable. I think F1 was far more ‘new’ and intriguing back then compared to other global sports. Nowadays there are so many more distractions to capture people’s imaginations. I think as time went on it was inevitable that the magic of incredible television coverage was going to trump the importance of filling seats, so much more vast is the global audience than the local one. And the money involved. And then there is the safety aspect of running races so carefree. I’m not saying I don’t wish for some of that old magic back, but I can understand why it has evolved the way it has.

  15. Don’t know why I feel a bit compelled to defend BE on this but it does feel a bit to me like piling on…particularly on the bribery accusation.

    I don’t think one can claim he dodged (if one takes that to mean underhandedly avoided) a billion in taxes, when it sounds like the trust fund was legally watertight. If he (his lawyers/financiers) used a legal means to see their client pay less in taxes, just as all super-rich do, then the figure of a billion is just pie in the sky headline grabbing. If an amount of 10 million was settled on, then the 1 billion can’t be a number that was ever realistic. So I don’t think BE ‘got away with’ anything more than all the super-rich do globally…but that doesn’t mean they don’t still pay millions in taxes ultimately….just likely a smaller percentage of their gross income than most of us. If he truly owed a billion and was avoiding that/refusing to pay, then they’d be going after him for that amount, plus interest, plus fines if not jail, plus court costs, and he likely would have fled the country to avoid said potential jail time. But a nine-year investigation and only 10 mill? Please.

  16. Poor Bernie;-). What a nice problem to have, when You think about it.

  17. It looks like Hamilton trusts in the team.

  18. Quite funny really. The taxman settled the case for a payment, it was paid so really they can’t do a lot.

    As for the amount owed, maybe the Government should try going after the 10’s of billions of pounds of Tax the likes of Google, Amazon, Vodafone etc avoided instead of looking after them and their own.

Comments are closed.