Money spinners! F1 pays just £1m of its £300m profit in UK tax arrangement

Complex: F1 owner Bernie Ecclestone - the system is calculated by several intra-group loans being set up

 Formula One has paid just £1million in corporation tax despite raking in profits of in excess of £300m it has been revealed.

The shocking figures have been disclosed in a prospectus for the planned floatation of Formula One on the Singapore stock exchange.

Via a series of complex tax arrangements, Formula One, which is run by billionaire Bernie Ecclestone, paid a net contribution of just £945,663 to the taxman in 2011 on revenues of £980m.

The most recent figures show that Formula One, whose biggest shareholder is Luxembourg-based private equity firm CVC Capital, made profits of £305m for the same period largely from the sale of television rights, race fees and advertising and sponsorship deals.

However, via a system of intra-group loans, Formula One has saved millions in corporation tax while an article in the Independent claims the massive reduction has been made courtesy of an ‘arrangement’ with HM Revenue and Customs.

The standard rate of cooperation tax in the United Kingdom is 24 per cent of a company’s profit. But Formula One has slashed its tax bill by taking out £2.5billion worth of loans from offshore companies within the group. The interest on the loans, which amounted to £387.7m in 2011, is tax deductible and thus Formula One has managed to engineer a mammoth saving in the UK.

'Efficient tax position': The super-popular sport has a healthy profit

And despite the clamour for tax avoidance loopholes to be closed, with companies such as Google and Starbucks in the spotlight in recent months, Formula One expects its money spinning arrangement to remain in place for the foreseeable future.

The flotation prospectus states that Formula One has ‘an efficient tax position’,  adding: ‘The group’s tax charge is materially dependent on the amount of UK tax relief available to it for interest expense on certain intra-group loans. We expect our aggregate cash tax payments to remain broadly consistent with prior years.’