BIM43105 - Specific deductions: crime (expenditure involving): detail of the legislation

ICTA88/S577A (1)(a) applies for the purposes of Schedule D to expenditure incurred on or after 11 June 1993. Section 577A (1)(b) applies to Schedule A or D expenditure incurred on or after 1 April 2002. Subsection (2) extends the rules to management expenses of companies.

The rules provide that:

ICTA88/S577A (1)(a)

• in computing profits or gains chargeable to tax under Schedule D, no deduction is to be made for any expenditure incurred in making any payment the making of which constitutes the commission of a criminal offence under UK law; and

ICTA88/S577A (1)(b)

• as (a) above but applying to payments outside the UK where the making of a similar payment within the UK would be a criminal offence.

ICTA88/S577A (2)

• expenditure of the type detailed above shall not be deducted in computing any expenses of management in respect of which relief may be given under the Tax Acts.

The kind of criminal payments caught by Section 577A (1) and (2) are explained at BIM43115 – BIM43150.

Subsection (1A), has effect from 30 November 1993 and covers blackmail expenditure incurred by an innocent victim of threats. It is dealt with in BIM43160 onwards.

Schedule A

Section 577A applies to Schedule A expenditure by virtue of ICTA88/S21A.

Incidental expenses

The restriction on relief described in BIM43101 covers not only the payment itself but also any incidental costs of making that payment. This follows from the words ’expenditure incurred in making any payment'.