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HMRC internal manual

Company Taxation Manual

Corporation Tax: management expenses: restrictive covenants

ICTA88/S313 imposes a charge to tax as employment income on the consideration an individual receives in return for a restrictive covenant. The charge is made in certain circumstances where an individual who:

  • holds, or
  • has held, or
  • is about to hold,

an office or employment, gives an undertaking which restrict his or her conduct or activities. There is guidance on this at SE03601 and SE03602.

The amount of any payment which:

  • is made or treated as made by an investment company (or a ‘company with investment business’ for periods starting on or after 1 April 2004), for an undertaking given by an employee or official after 9 June 1988,


  • is taxed under ICTA88/S313,

is treated as an expense of management under ICTA88/S75 by virtue of FA88/S73 (3).