Commentary

229.6 Tax implications of payments made under a restrictive covenant

BUSINESSES vol 4(2) start-up, sale and purchase
| Commentary

229.6 Tax implications of payments made under a restrictive covenant

| Commentary

229.6 Tax implications of payments made under a restrictive covenant

If the buyer agrees that part of the consideration for the sale of the business may be attributed as a payment to the seller for entering a restrictive or non-compete covenant, the buyer should be able to deduct the payment from his trading profits for the year for tax purposes1. The seller will be taxable on the restrictive covenant payment as employment income2 and should be made aware of this risk where the payment would attract less tax if it were chargeable to capital gains tax,

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