Some one on FB (the chap who runs rollin' on steelies) got pulled over and nearly lost his licence because of dodgy number plates and stretched tyres. It's a new legal thing they have brought out recently, because it isn't safe.
YetI
It's legal as long as it's within the tyre's maximum recommendations, a friend of mine ran them on his caddy for ages and his car went through an mot station and passed with them on, and he got pulled and the police checked them but said they weren't stretched enough to be illegal. I'm not saying stupid stretch is legal or safe, because stretching too far obviously is. But some stores even sell wheels with stretched tyres (look on some of the huddersfield spares images for example), so it can't be that bad as long as it's not stretched too far.
The reason, i've heard, that drifters stretch is often so that there's even less tread to give too much grip. This is obviously on the lower performance classes where there isn't as much power to the wheels, so they need less grip. Some of the higher powered drifters run positive camber to give more grip as otherwise the cars would just spin.
No-one runs positive camber in drifting. It's illegal.