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HMRC internal manual

Business Income Manual

HM Revenue & Customs
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Specific deductions: crime (expenditure involving): criminal payments: scope

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

As described at BIM43101, no deduction is allowed for payments the making of which constitutes a criminal offence, whether within or outside the UK. The disallowance therefore clearly applies to payments that by explicit operation of law are criminal acts. Thus, for example, a payment by a trader that is within the Terrorism Act 2000 (see BIM43120) is caught.

Further examples of payments which could be disallowed are:

  • payment for stolen goods knowing them to be stolen is often the criminal offence of handling;
  • payments which form part of a scheme to evade VAT and are therefore part of the offence of the fraudulent evasion of VAT under S72(1) Value Added Tax Act 1994.

This list is far from exhaustive. You should seek advice from CTISA (Technical) if you are considering the treatment of a payment which is linked to a course of conduct which is admitted to be criminal, or you suspect amounts to a crime, and the payment could be a component of that crime although the offence is not clearly the making of the payment itself.

More information is given in BIM43120 onwards about areas of non-tax law which involve payments that are criminal acts. The aim is to give you some general background. The criminal law is clearly a complex subject in its own right. If you require advice on a specific case refer to CTISA (Technical).