§ Dawn Primarolo
Section 577A, Income and Corporation Taxes Act (ICTA) 1988 denies tax relief for any payment the making of which constitutes the commission of a criminal offence.
This effectively denies relief, inter alia, for any bribe which is contrary to the Prevention of Corruption Acts. There is also a general provision (section 577 ICTA) which denies tax relief for any form of business entertainment, hospitality or gift—so some payments which might be in a grey area might in any event be denied relief without the need to show that they were in any way corrupt payments.
As far as enforcement is concerned, the Inland Revenue examines a proportion of tax returns every year, to ensure that taxpayers pay the correct amount of tax. Most of the returns that are examined in detail are selected after a risk assessment, which identifies those cases where errors are most likely, and where the amount at stake is greatest. Tax inspectors are trained to discover evasion, avoidance and technical errors, by establishing the full facts and applying the correct interpretation of tax law. As part of this process they will, where appropriate, make inquiries about claims for expenditure, to ensure that they are allowed under tax law.