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HMRC internal manual

Business Income Manual

HM Revenue & Customs
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Specific deductions: crime (expenditure involving): blackmail and extortion: overview

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

As described at BIM43101, no deduction is allowed for any expenditure incurred in making a payment induced by a demand constituting the offence of blackmail under the relevant law in England or Wales and Northern Ireland or, in Scotland, the offence of extortion.

This rule applies even if the payer is an innocent victim - see BIM43170. But there are territorial limitations - see BIM43165.

Offence of blackmail

The offence of blackmail is created in England and Wales by S21 Theft Act 1968. This says it is an offence for anyone to make an unwarranted demand with menaces with a view of gain to himself or with intent to cause loss to another. An ’unwarranted demand’ is made unless the person making the demand has reasonable grounds for doing so and the use of menaces is a proper means of reinforcing the demand. Accordingly, money demanded may be properly due but there would still be an offence if improper menaces are used.

Offence of extortion in Scotland

There is similar legislation in Northern Ireland and Scotland. In Scotland the corresponding offence is called ’extortion’.