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Criminal Defence Costs Not Tax Deductible

In a clear indication that criminal defence costs will generally not be considered tax deductible, the boss of a transport business who spent almost £270,000 fighting a manslaughter charge after one of his lorries hit and killed a pensioner has failed in a bid to write off the expenditure against his firm’s tax bills.

The 78-year-old woman died when a car transporter mounted the kerb in 2002. The vehicle’s brakes were said to have been maladjusted and its driver was later jailed for 12 months after he admitted manslaughter.

His boss, Paul Duckmanton, who ran an unincorporated business which had a fleet of 18 car transporters, was acquitted of gross negligence manslaughter. However, he admitted falsifying vehicle maintenance records and was jailed for eight months after pleading guilty to two counts of attempting to pervert the course of justice.

Mr Duckmanton ran up legal costs bills totalling £268,672 in successfully defending himself against the manslaughter charge and argued that he should be permitted to write off that sum against his firm’s tax liabilities. However, Her Majesty’s Revenue and Customs (HMRC) disagreed and refused the tax deduction sought.

The businessman argued before the First Tier Tribunal that his defence costs had been ‘wholly and exclusively’ incurred for the purposes of his business. It was submitted that he had been ‘indifferent to the prospect of imprisonment’ during his trial and that his only real concern was to protect the reputation of his business and to keep his heavy goods vehicle operator’s licence.

Those arguments failed and, in dismissing the businessman’s appeal against that decision, the Upper Tribunal noted that the protection of his own reputation; the prospect that he would lose his liberty for an extended period if convicted and the possibility of a substantial damages claim by the dead woman’s family must all have been factors in his decision to incur substantial costs in his defence.