BIM43120 - Specific deductions: crime (expenditure involving): criminal payments: Prevention of Terrorism Acts

The Prevention of Terrorism (Temporary Provisions) Act 1989 (PTA) provides various sanctions to stop terrorism and terrorist organisations getting financial support. Such support is often extorted from the donor by an explicit or implicit threat to the donor's person, family or property. To constitute a criminal act under the PTA the payer must know he or she is making the payment to a proscribed organisation.

The PTA makes the giving of any such financial support, whether or not extorted, a criminal act by the giver. Thus, for example, a payment for ’protection' extorted by a terrorist group might qualify as a deduction under ordinary tax principles if it satisfies the first two bullet points at BIM43100. But the payment is disallowed by ICTA88/S577A (1) where it is incurred on or after 11 June 1993.

Some taxpayers attribute cash discrepancies to such payments. When this contention is made for expenditure incurred on or after 11 June 1993, any omitted sales etc receipts must be brought in and any claim for relief for the payments must be considered separately in the light of ICTA88/S577A (1).

Where the payer states that the threat was from a criminal organisation with no known terrorist affinity (and so the original rules in ICTA88/S577A (1) do not apply) the payment may fall to be disallowed as blackmail under ICTA88/S577A (1A) (see BIM43160 and, particularly, BIM43175).