Employment tax implications of a TUPE transfer
Employment tax implications of a TUPE transfer

The following Tax practice note provides comprehensive and up to date legal information covering:

  • Employment tax implications of a TUPE transfer
  • PAYE obligations
  • Transferor
  • Transferee
  • Form P45
  • NICs liabilities
  • Transferor
  • Transferee
  • Asset purchase agreement
  • Tax treatment of payments made on a TUPE transfer
  • More...

Coronavirus (COVID-19) and TUPE transfers: the Coronavirus Job Retention Scheme (CJRS), which provides support to employers with a grant to enable them to continue paying salaries of employees that have been part of fully furloughed’ during the coronavirus outbreak, is available for employees that have been TUPE transferred to a new employer in certain circumstances. For more detail on the CJRS and TUPE transfers, see Practice Note: Coronavirus Job Retention Scheme (revised version 1 July to 31 October 2020) — Employee transfers under TUPE and on a change in ownership.

When employees are transferred along with the business in which they work pursuant to the Transfer of Undertakings (Protection of Employment) (TUPE) Regulations 2006, SI 2006/246, there will be numerous employment tax implications to consider, including:

  1. PAYE obligations

  2. national insurance contribution (NICs) liabilities, and

  3. the tax treatment of payments made to employees on the transfer

If the transferring employees have been granted share incentives, care should be taken in respect of those arrangements. For detail, see Practice Note: Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) and share incentives.

This Practice Note does not consider the non-tax aspects of a TUPE transfer, as they are comprehensively considered in the TUPE subtopic, see: TUPE and asset purchases—overview.

PAYE obligations

Employers are required to deduct tax from relevant payments to employees under the PAYE regime. On a TUPE transfer, given there will

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