BIM43160 - Specific deductions: crime (expenditure involving): blackmail and extortion: overview

ICTA88/S577A (1A) applies to blackmail expenditure incurred on or after 30 November 1993. It provides that:

• in computing profits or gains chargeable to tax under Schedule D, no deduction is to be made 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; and
• because the existing subsection (2) is applied to (1A), such expenditure shall not be deducted in computing any expenses of management in respect of which relief may be given under the Tax Acts.

Subsection (1A) 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 Section 21 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'.