Income Tax (Earnings and Pensions) Act 2003 section 226

Valuable consideration given for restrictive undertakings

Section 226 deals with the tax treatment of non-monetary consideration received by an individual in return for giving or fulfilling a restrictive undertaking connected with their employment.

• Where an individual gives a restrictive undertaking linked to current, future or past employment and receives valuable non-cash consideration, the payment rules of section 225 apply as though a cash payment equal to the value of that consideration had been made
• The non-cash consideration may be given either for agreeing to the restrictive undertaking or for wholly or partially fulfilling it
• Simply promising or assuming an obligation to hand over valuable property, rights or advantages does not count as valuable consideration
• Actually discharging such an obligation, whether in full or in part, does count as valuable consideration and triggers the tax charge