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HMRC internal manual

Business Income Manual

Miscellaneous income: particular sources: restraint of trade

S687-S689 Income Tax (Trading and Other Income) Act 2005, S979-S981 Corporation Tax Act 2009

A payment for agreeing not to do something may be chargeable as miscellaneous income under the sweep-up provisions.

The case of Higgs v Olivier [1952] 33TC136 relates to a payment made to Sir Laurence Olivier. Following the making of the film of Henry V, Olivier agreed not to act in, produce or direct a film for any other person for a period of eighteen months in return for a payment of £15,000. This was held not to be taxable as income from his profession as an actor/director.

It was considered that a payment not to do something was not a trading receipt (see BIM35600), however the question of whether such a payment was taxable under the sweep-up provisions was not considered in this case.

Judicial comments in later cases have indicated that such payments are a payment for a service chargeable under the sweep-up provisions.

In Murray v ICI Ltd [1967] 44TC175, Cross J said at page 207:

‘The Crown made no alternative argument under [the sweep-up provisions] on the basis that the £15,000 was a payment for a service rendered by Sir Laurence Olivier at the request of the film company. Had it done so, then the question might well have arisen whether it was a casual profit of a revenue nature or a payment for parting with a capital asset: see the judgement of Rowlatt J. in Ryall v Hoare 8TC521. It may be - I say no more - that, had the claim been put that way, the Crown would have succeeded.’

The Court of Appeal approved Cross J’s judgment in full.