TCTM04116 | Income: Employment income rules: Any sum to which section 225 of the ITEPA 2003 (taxation of consideration for certain restrictive undertakings) applies

The Tax Credits (Definition and Calculation of Income) Regulations 2002, Reg. 4(1)(j)

This is where an employee receives payment in connection with his or her employment for agreeing to restrict their future conduct or activities.

Such an agreement is known as a restrictive covenant or undertaking. It is usually (though not invariably) made between employee and employer in order to restrict the employee’s activities if the employment is terminated.

This is the income tax provision. See Employment Income Manual para EIM03600 for the detailed rules.