Section 1304: Crime-related payments
3335.This section prohibits any deduction for expenses incurred in making a payment:
the making of which is a criminal offence, or which would be a criminal offence if the payment were made in the United Kingdom; or
which is made in response to a demand, the making of which is a criminal offence.
3336.The section is based on section 577A of ICTA. The corresponding rule for income tax is in section 870 of ITTOIA.
3337.The source legislation denies a deduction for certain crime-related payments “in computing profits chargeable to corporation tax under Schedule D”. Profits chargeable to tax under Schedule D include profits of a business which is neither a trade nor a property business.
3338.The section applies to income charged to corporation tax. Some kinds of income are not charged under Schedule D in the source legislation. But the prohibition of a deduction is not thought to have any practical effect on income that is not charged under Schedule D. So the scope of the prohibition is unchanged.
3339.The section overrides any provision which otherwise allows a deduction to be made in calculating the profits of a trade. See section 51(1)(b) of this Act.