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HMRC internal manual

Employment Income Manual

HM Revenue & Customs
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Employment income: earnings from employment: payment for loss of rights

Section 62 ITEPA 2003

Employees sometimes claim that a payment is not taxable because it is for loss of rights.

The fact that a payment is for loss of rights does not, by itself, determine whether it is taxable. It is important to consider the nature of the right that has been given up. The nature of the right will show whether the payment is from the employment or from something else (see EIM00600).

As regards:

  • a payment for restricting the employee’s freedom within the employment, see EIM00690
  • a payment for giving up a valuable right on taking up employment, see EIM00710.