Guns and tax relief

Did you hear the one about the bank robber who claimed a gun as a business expense?  Yes indeed this true story was printed in the Daily Telegraph.  What is more alarming is that the claim succeeded.
A bank robber was allowed to claim the £1,400 cost of the gun used when he robbed a local bank in Holland. He had got away with £4,700.  The Dutch judge reduced his fine by the cost of the gun since it was a legitimate business expense.  What's more the Dutch prosecutors' service confirmed that the judge was in order to do so.

So that was Holland.  Well we all know they are a bit liberal over there.  It couldn't happen back in the UK.  Surely not?

Well you know it just might.  What people often do not realise is that the tax man can get his hands on the proceeds of any business.  The fact that the business is illegal is no barrier.

So you could find HMRC taxing drug dealers and owners of brothels.  Indeed it has happened.  Of course it is fairly rare, but at the sharp end of tax investigations Inspectors sometimes find money being made which is not only not taxed, but the whole enterprise is illegal as well.

If we find a keen Inspector seeking to tax an illegal business then what figure does he assess?  Should it be the total proceeds from the crime, or the net after expenses?  Interesting point – and not just an academic one at that.

There is no reason why a bank robber could not claim capital allowances on the gun used in his 'business' of robbing banks.  Or the wages of his accomplices.  Or running costs of his getaway cars (unless he stole them in which case he might not be out-of-pocket.)

There is a blanket restriction nowadays that you cannot claim tax relief on a payment which it is an offence to make.  This is the (relatively recent) law which prohibits tax relief on protection money payments to gangsters.  So if our hypothetical bank robber pays his local hoods for protection while operating in their patch then those payments will not attract tax relief.

In case you think this is all a bit scary for your typical local tax inspector, let me say you are probably right.  Matters like these are more likely to be handed over to HM Revenue & Customs tax investigation specialists.

As anyone reading the papers knows, the Serious Organised Crime Agency (SOCA) has been its muscles in relation to organised crime – freezing bank accounts, seizing houses and the like.  So between them the tax man and SOCA will try to tax criminals to the hilt.  And of course the criminals will continue to enjoy the game of cat and mouse to keep their money out of government coffers.