Commentary on Sections Overview Overview Section 69: Payments for restrictive undertakings
276.This section allows a company to deduct certain amounts paid to employees for restrictive undertakings. Such amounts might not otherwise be deductible to the extent that they are capital in nature or fall foul of the “wholly and exclusively” rule. The section is based on section 73(2) of FA 1988. The corresponding rule for income tax is in section 69 of ITTOIA.
277.Section 73(2) of FA 1988 applies only to amounts brought into charge on the employee as earnings under section 225 of ITEPA. The former cross-refers to the latter where the definition of the amounts concerned is set out:
In this section “restrictive undertaking” means an undertaking which restricts the individual’s conduct or activities.
For this purpose it does not matter whether or not the undertaking is legally enforceable or is qualified.
278.Subsection (1) provides for the deduction. In so doing it focuses on the key element for the rule to apply: the fact of payment.
279.Subsection (2) provides a timing rule. The deduction allowed by section 73 of FA 1988 is taken in the accounting period in which the payment is made and no deduction is allowed in any other period. Similar words are used in sections 77 and 88. This ensures that the timing rules for deductions in this Chapter which depend on payment are explicit and consistent.