Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Restrictive Covenant definition

What does Restrictive Covenant mean? A restrictive covenant is a promise not to carry out specified acts. In practice it arises chiefly in land transactions and in employment or commercial agreements. The expression is descriptive and shaped largely by case law, with statutory frameworks for registration and modification. Land law (England & Wales and Northern Ireland): a negative covenant affecting land use may bind successors in equity if it benefits identifiable land and “touches and concerns” it, the original parties intended the burden to run, and a successor takes with notice (now usually via registration). Protection is by entry of a notice on the registered title,...

UK taxation of payments for restrictive covenants and undertakings under ITEPA 2003 s225: settlement/termination agreements, not-to-sue undertakings, PAYE/NICs, HMRC SP 3/96, excessive sums and attribution

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Practice notes

Restrictive covenants or undertakings

These are promises employees make during employment or on leaving, limiting their behaviour or activities. Following historic debate over whether payments for such covenants or undertakings fell within general earnings under the relevant income tax legislation, a dedicated charging provision ensures that any sums connected with current, future, or past employments or offices are treated as taxable earnings...

Tax treatment

Section 225 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003) brings into charge payments made to an individual for agreeing to restrictive covenants...

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Sam Whitaker

Debevoise & Plimpton LLP

Sam is an International Counsel in the London office of Debevoise & Plimpton LLP. He provides the full range of employment and benefits advice on transactions and stand-alone employment matters. He has substantial experience of advising on the employment and benefits aspects of various transactions, including UK listings, share and asset acquisitions and disposals (both UK-based and multi-jurisdictional transactions), joint ventures and other transactions. He provides the full range of stand-alone employment advice including the implementation of employment and benefit arrangements for senior executives, implementing executive severance arrangements, managing UK and international redundancy exercises and related consultation requirements, the establishment of share incentive and bonus plans, employment litigation involving restrictive covenants, unfair and wrongful dismissal and discrimination issues. He also advises on compliance with regulatory requirements on remuneration, in particular the FCA/PRA’s Remuneration Codes and, at a European level, CRDV....

Web page updated on 22/05/2026

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