Income Tax (Earnings and Pensions) Act 2003

225 Payments for restrictive undertakings U.K.

(1) This section applies where—

(a) an individual gives a restrictive undertaking in connection with the individual’s current, future or past employment, and

(b) a payment is made in respect of—

(i) the giving of the undertaking, or

(ii) the total or partial fulfilment of the undertaking.

(2) It does not matter to whom the payment is made.

(3) The payment is to be treated as earnings from the employment for the tax year in which it is made.

(4) Subsection (3) does not apply if the payment constitutes earnings from the employment by virtue of any other provision.

(5) A payment made after the death of the individual who gave the undertaking is treated for the purposes of this section as having been made immediately before the death.

[F1 (6) This section only applies where—

(a) if there are general earnings from the employment that are earned in, or otherwise in respect of, the tax year mentioned in subsection (3), subsection (7) applies to any of those general earnings, or

(b) it is reasonable to assume that, if there were such general earnings, subsection (7) would apply to any of those general earnings.

(7) This subsection applies to general earnings if either—

(a) section 15 applies to the general earnings and the general earnings are not—

(i) qualifying foreign general earnings within the meaning of section 41T (qualifying foreign general earnings), or

(ii) general earnings to which section 22 or section 26 would apply if the individual made a claim under section 809B of ITA 2007 (claim for the remittance basis) for the tax year mentioned in section 22(1) or 26(1) (being a tax year before tax year 2025-26), or

(b) section 27 applies to the general earnings.]

(8) In this section “restrictive undertaking” means an undertaking which restricts the individual’s conduct or activities.

For this purpose it does not matter whether or not the undertaking is legally enforceable or is qualified.

Textual Amendments

F1 S. 225(6)(7) substituted for s. 225(6) (for the tax year 2025-26 and subsequent tax years) by Finance Act 2025 (c. 8), s. 38(3), Sch. 8 para. 1(3) (with Sch. 8 Pt. 3)