»Ê¹ÚÌåÓýapp

S55 Income Tax (Trading and Other Income) Act 2005, S1304 Corporation Tax Act 2009

Criminal payments

No deduction is allowed in calculating the profits of a trade for expenses incurred:

• in making a payment if the making of the payment constitutes a criminal offence, or
• in making a payment outside the UK if the making of a corresponding payment in any part of the UK would constitute a criminal offence in that part.

Examples of the kinds of payments that are disallowed (referred to in this guidance as ‘criminal payments�) are payments for firearms without holding a valid firearm certificate, payments to terrorists and bribes to win contracts. Further guidance is at BIM43115 - BIM43130.

Blackmail and extortion

No deduction is allowed in calculating the profits of a trade for expenses incurred in making a payment induced by a demand which constitutes:

• in England or Wales, the offence of blackmail (under S21 »Ê¹ÚÌåÓýappft Act 1968);
• in Scotland, the offence of extortion; or
• in Northern Ireland, the offence of blackmail (under S20 »Ê¹ÚÌåÓýappft Act (Northern Ireland) 1969).

An example of the kind of payment that is disallowed is a payment to a gangster for ‘protection�. Further guidance is at BIM43160 onwards.

»Ê¹ÚÌåÓýappse provisions reflect Parliament’s wish to stop indirect subsidies to criminal activities through the tax system and to encourage people not to submit to extortion.

Incidental expenses

»Ê¹ÚÌåÓýapp restrictions on deductions described above cover not only the payment itself but also any incidental costs of making that payment. This follows from the words ’expenditure incurred in making a paymentâ€�.

Handling

This legislation raises sensitive issues. Please note particularly the handling advice throughout and in particular BIM43130 and BIM43185.