伊人直播

Section 225 ITEPA 2003

Example 3

An employee agrees to the following restrictions set out in a termination agreement:

The employee will not:

• work within a 20 mile radius of the company premises
• contact any customer or supplier of the employer.

Both restrictions apply for a period of 24 months after cessation of employment. Consideration is agreed on the following basis:

• 拢20,000 paid immediately upon signing the termination agreement
• 拢10,000 paid on the first anniversary of signing the termination agreement
• 拢10,000 paid on the second anniversary of signing the termination agreement.

The first payment is made but after 6 months the former employee sets up a business 10 miles from her former place of work. Payments 2 and 3 are not made. The former employer sues for breach and is awarded damages of 拢15,000. The former employee contacts the Inspector wishing to reduce her self assessment of Section 225 ITEPA 2003 liability from 拢20,000 to 拢5,000.

Comment

The payment of 拢20,000 is within Section 225 and is chargeable as general earnings (see EIM00511) of the year of receipt. No deduction or reduction is possible. The employee received 拢20,000 for entering into a restrictive covenant. The fact that she breached the agreement and was required to pay compensation is a separate event that does not reduce the amount she received. Section 225 brings the consideration within the charge on employment income (see EIM00510). No statutory deductions or exemptions apply.

Payments 2 and 3 are not within Section 225 as they were never made (see EIM03601 4th bullet).