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Finance Act 1950

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26Surtax to be charged on consideration for certain restrictive covenants, etc.

(1)Where—

(a)an individual who holds, has held or is about to hold an office or employment gives, in connection with his holding thereof, an undertaking (whether absolute or qualified and whether legally valid or not) the tenor or effect of which is to restrict him as to his conduct or activities; and

(b)in respect of the giving of that undertaking by him, or of the total or partial fulfilment of that undertaking by him, any sum is paid either to him or to any other person; and

(c)apart from this section, the sum paid would neither fall to be treated as income of any person for the purposes of income tax for any year of assessment nor fall to be taken into account as a receipt in computing, for the purposes of income tax for any year of assessment, the amount of any income of, or loss incurred by, any person,

the same results shall follow in relation to surtax for the year of assessment in which the said sum is paid as would have followed if the said sum had been paid to the said individual (and not to any other person) as and for the net amount of an annual payment to which the said individual was entitled, being an annual payment chargeable to income tax from the gross amount of which tax at the standard rate for that year had been duly deducted under Rule 19 or Rule 21 of the General Rules:

Provided that where the individual has died before the payment of the said sum, so much of the preceding provisions of this subsection as relates to the results which are to follow from the matters specified in paragraphs (a) to (c) of this subsection shall have effect as if the said sum had been paid immediately before the death.

(2)Where valuable consideration otherwise than in the form of money is given in respect of the giving of, or of the total or partial fulfilment of, any undertaking, the preceding provisions of this section shall apply as if a sum had instead been paid equal to the value of that consideration.

(3)The preceding provisions of this section shall apply to surtax for the year 1949-50 or any subsequent year of assessment, and, in relation to surtax for any of the said years, shall be deemed always to have had effect, and all such assessments and additional assessments shall be made as are necessary to give effect to the provisions of this subsection:

Provided that—

(a)the said preceding provisions shall not apply to any sums paid or consideration given if either—

(i)the undertaking in question was given on or before the sixth day of April, nineteen hundred and forty-eight; or

(ii)the sum or consideration is or was paid or given at or after the time of the retirement of the individual in question from the service of the person under whom the office or employment in question was held and is or was so paid or given in pursuance of a provision in that behalf which expressly provides for the payment or giving thereof at or after that time and is embodied in a contract made in writing on or before the eighteenth day of April, nineteen hundred and fifty, or reduced to writing on or before that date; or

(iii)the sum or consideration is or was paid or given in pursuance of an express provision in that behalf embodied in a contract made in writing on or before the eighteenth day of April, nineteen hundred and fifty, or reduced to writing on or before that date, being a contract the main purpose of which was to provide for the transfer of a trade or part of a trade or for the transfer of the controlling interest in any body corporate ; and

(b)no person shall be liable to any penalty by reason that, in any return or particulars of income made or furnished before the passing of this Act, any amount has not been included which ought to have been included in view of the said preceding provisions. For the purposes of this subsection, a director of a company shall be deemed to be in the service of that company and to hold his office as such under that company.

(4)Where any sum is paid or valuable consideration given to any person in any year of assessment in respect of the giving of, or of the total or partial fulfilment of, an undertaking given after the sixth day of April, nineteen hundred and forty-eight, and satisfying the conditions specified in paragraph (a) of subsection (1) of this section (not being a sum from which tax is duly deducted under any provision of the Income Tax Acts), it shall, subject to the provisions of this subsection, be the duty of the person paying over the sum or giving the consideration to deliver particulars thereof in writing to the surveyor not later than one month after the end of that year, identifying the recipient of the payment or consideration, the undertaking in connection with which it was made or given and the individual who gave that undertaking; and the provisions of section one hundred and seven of the Income Tax Act, 1918 (which relates to failure to deliver lists, declarations and statements) shall apply in relation to the particulars required to be delivered under this subsection as they apply in relation to any list, declaration or statement required to be delivered by any such notice as is referred to in that section. This subsection applies to any sum paid or consideration given in the year 1949-50 or any subsequent year of assessment, but where the payment or giving of the sum or consideration took place during the year 1949-50, the time for delivering the particulars shall not expire until one month after the passing of this Act.

(5)In this section, the expression " office or employment" means any office or employment whatsoever such that the emoluments thereof, if any, are or would be chargeable to income tax under Schedule E for any year of assessment; and references in this section to the giving of valuable consideration do not include references to the mere assumption of an obligation to make over or provide valuable property, rights or advantages, but do include references to the doing of anything in or towards the discharge of such an obligation.

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