Income Tax (Earnings and Pensions) Act 2003 section 225

Payments for restrictive undertakings

Section 225 deals with the tax treatment of payments made to or in respect of an individual who agrees to restrict their conduct or activities in connection with their employment.

• Payments made for giving or fulfilling a restrictive undertaking connected with current, past or future employment are treated as taxable earnings in the year the payment is made
• The section applies regardless of who actually receives the payment, and the undertaking need not be legally enforceable or unconditional
• If the payment already counts as employment earnings under another provision, this section does not apply on top of that
• If a payment is made after the individual's death, it is treated as having been made immediately before they died