EIM03601 - Restrictive undertakings: statutory conditions

Section 225 ITEPA 2003

Conditions

In order for consideration to be brought into charge by Section 225, the following conditions must be satisfied by the individual:

  • a restrictive undertaking is given in connection with a current, future or past office or employment
  • the undertaking must restrict conduct or activities. It may be absolute or qualified and need not be legally binding.
  • A payment is made in respect of the giving of the undertaking or its partial or total fulfilment. It does not matter to whom the payment is made.
  • The sum would not otherwise be treated as general earnings (see EIM00511).
  • If an asset or other valuable consideration is given instead of money then the cash value of the asset is charged (see EIM03604).

In addition, the office or employment must be one for which:

  • For periods before 6 April 2008 the earnings fall within Sections 15, 21, 25 or 27 ITEPA 2003 (see EIM40002) or would do so if there were any.
  • For periods after 5 April 2008 and before 6 April 2025, the earnings fall within Sections 15 or 27 ITEPA 2003 (see EIM40002) or would do so if there were any.
  • For periods after 5 April 2025, the general earnings fall (or it is reasonable to assume that, if there were such general earnings, they would fall) within:
    • Section 15, provided the general earnings are not qualifying foreign general earnings (see EIM43565 ) defined in 41T Chapter 5C of Part 2 ITEPA 2003, or, for tax years before 2025-26, are not general earnings to which section 22 or 26 apply through a claim made to the remittance basis,
    • or section 27.

Year in which the charge arises

The charge arises in the year in which the payment is made. If the individual dies before a payment is made it is treated as if it had been paid immediately prior to his death.