BIM43180 - Specific deductions: crime (expenditure involving): blackmail and extortion: examples

ICTA88/S577A (1A) may deny a deduction 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 ( BIM43160), 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 the expenditure is on revenue account and it is incurred wholly and exclusively for the purposes of the trade etc and they are not criminal payments within Section 577A (1) ( BIM43120).