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HMRC internal manual

Business Income Manual

Specific deductions: crime (expenditure involving): blackmail and extortion: examples

A deduction for a payment induced by blackmail or extortion may be denied where, for example:

  • ransom is paid by an employer to obtain the release of a kidnapped employee,
  • payments are made by businesses to buy off threats to damage their premises or to poison food, medicine etc.

However, subject to the disallowance of payments which are incidental to the payment of the blackmail itself (see BIM43101), other expenses arising out of blackmail may be allowable. For example, normal principles will usually apply to the extra cost of:

  • guarding premises or searching stock for sabotaged goods,
  • replacing damaged goods.

That is, these expenses will be allowable if they meet the normal tests that the expenditure is not capital and it is incurred wholly and exclusively for the purposes of the trade and they are not criminal payments.