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Chapter EIM03623

Document Cited in Related
Vincent
Published date22 May 2014
Record NumberEIM03623
CourtHM Revenue & Customs
IssuerHM Revenue & Customs
Section 225 ITEPA 2003 Example 3

An employee agrees to the following restrictions set out in a termination agreement:

The employee will not:

  • work within a 20 mile radius of the company premises
  • contact any customer or supplier of the employer.

Both restrictions apply for a period of 24 months after cessation of employment. Consideration is agreed on the following basis:

  • £20,000 paid immediately upon signing the termination agreement
  • £10,000 paid on the first anniversary of signing the termination agreement
  • £10,000 paid on the second anniversary of signing the termination agreement.

The first payment is made but after 6 months the former employee sets up a business 10 miles from her former place of work. Payments 2 and 3 are not made. The former employer sues for breach and is awarded damages of £15,000. The former employee contacts the Inspector wishing to reduce her self assessment of Section 225 ITEPA 2003 liability from £20,000 to £5,000.

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