§ Lord Lester of Herne Hill
asked Her Majesty's Government:
What is the policy and practice of the Inland Revenue regarding the deduction from liablity to tax of financial incentives paid to United Kingdom companies or individuals to foreign governments or foreign corporations, or their officers, employees or agents, to encourage them to enter into commercial contracts or other profitable arrangements with United Kingdom firms. [HL2180]
§ Lord McIntosh of Haringey
Section 577A of the Taxes Act 1988 provides that, when computing taxable profits, a business is not allowed relief for expenditure incurred on illegal payments. A financial incentive paid by a company or an individual to a third party for business purposes will not be deductible if the 215WA making of that payment constitutes a criminal offence in the UK, or would do so if the payment were made in the UK.
The Inland Revenue's policy and practice is to apply the legislation as intended.