BIM43115 - Specific deductions: crime (expenditure involving): criminal payments: scope

ICTA88/S577A (1)(a) and (b) denies relief for payments ’the making of which constitutes the commission of 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 Prevention of Terrorism (Temporary Provisions) Act 1989 ( BIM43120) is caught by Section 577A (1).

But disallowance also extends to payments that, while not explicitly criminal acts, are a usual component of an offence. For example:

• Payment for dangerous drugs would usually be part of the offence of importing, dealing and/or producing dangerous drugs contrary to the Misuse of Drugs Act 1971.
• Assisting a person to deal with the proceeds of drug trafficking is an offence under Section 24 Drug Trafficking Offences Act 1986 which could involve illegal payments.
• Payment for stolen goods knowing them to be stolen is often the criminal offence of handling.

This list is far from exhaustive. You should seek advice from CT&VAT (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 and where Section 577A (1) applies. 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 CT&VAT (Technical).