Formula One has told its shareholders that the company's tax bill has been reduced by millions following a decision by H.M. Revenue and Customs (HMRC).

A year ago the sport was bought by Liberty Media, which is American, but the companies which run F1 and own its commercial rights are based in London and are therefore liable to tax in the UK.

Librty's latest accounts, for the year ending 31 December 2016, reveal that in 2016 F1 paid just £6.9m in corporation tax even though it enjoyed a £350m profit, known as earnings before interest, tax, depreciation and amortisation (EBITDA).

According to the Telegraph, a clever, but fully legal, move gave F1 a tax rate of around 2% even though the standard rate is 20%

In 2017, this was expected to increase under new legislation. Indeed, in May Liberty even warned shareholders to expect "low double digit effective cash tax rate". However, this has been avoided without exceeding track limits and thereby incurring a penalty.

In a letter to shareholders last week, Liberty revealed that it "had previously estimated that future cash taxes for Formula 1 would be at a low double digit percentage of UK EBITDA. Liberty is now expecting a mid to high single-digit effective cash tax rate on UK EBITDA for its Formula 1 business." It explained that this is lower than previously forecast because of "conclusions reached by Her Majesty's Revenue and Customs regarding the future treatment under UK tax law of certain historic transactions and the effects of a Formula 1 corporate restructuring in the fourth quarter of 2017."

The "restructuring" referred to saw Liberty switching the offshore parent companies of F1's rights-holder for ones which are based in the UK, a move that clearly has the approval of the tax man.

With F1 saving £3.5m for every percentage point of reduction in its tax rate, this means a healthy boost to its coffers, and not for the first time.

In 2008, F1's former owner CVC set up a scheme which saved it more than £400m in tax, also with HMRC's approval.

Before the restructuring, F1's UK-based operating businesses were owned by parent companies which were based in tax havens and this was at the heart of the scheme. These offshore companies gave huge loans to their UK subsidiaries which paid hundreds of millions of pounds in interest on them every year. This pushed them into loss so they paid little tax. The profit of the UK companies was essentially wiped out by the interest and as it was received by offshore companies it could be paid to F1's owners without tax being deducted.

This came with HMRC's blessing as it had to approve the amount of interest which was tax-deductible. However, last year the government introduced legislation which capped the amount of tax-deductible interest on these loans at 30% of profits.

It was thought this would increase F1's tax bill as its interest payments had completely cancelled out its profits in recent years. Testimony to this, in December 2016 Liberty said in its filings that "the new rules could reduce significantly the amount of Formula 1's interest expense that qualifies as tax deductible. These changes could adversely affect Formula 1's financial results and position".

However, Liberty's letter to investors reveals that the new legislation didn't hit F1 nearly as hard as feared. In fact getting in contact with HMRC could prove be the smartest manoeuvre that Liberty has pulled.