Taxes Consolidation Act 1997 Schedule 3, paragraph 5

Covenanted income and termination payment relief

Schedule 3, paragraph 5 restricts termination payment relief by preventing it from being claimed against income where the related tax can be passed on to another person.

• Termination payment relief cannot be claimed on income where the tax is chargeable against another person
• This includes income from which the claimant can deduct, retain or satisfy tax out of payments owed to others
• The main target is covenanted income, where tax must be deducted from annual payments under section 237
• The restriction ensures that relief is only available where the claimant genuinely bears the tax burden