Q&As

What are the PAYE and NICs implications of a TUPE transfer?

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Published on LexisPSL on 16/02/2016

The following Tax Q&A provides comprehensive and up to date legal information covering:

  • What are the PAYE and NICs implications of a TUPE transfer?
  • Transferor
  • Transferee
  • Forms P45
  • Share incentives

What are the PAYE and NICs implications of a TUPE transfer?

When employees are transferred to a new business pursuant to a TUPE transfer, there will be numerous PAYE and national insurance contributions (NICs) implications to consider.

For an overview of the PAYE regime, including the real time information (RTI) obligations, see Practice Note: PAYE compliance and RTI.

Transferor

The transferor must:

  1. operate PAYE on any payments made to employees prior to the TUPE transfer (other than in respect of any payments made by the transferee)

  2. operate PAYE on any payments it makes to employees after the TUPE transfer

  3. account to HMRC for any Class 1 NICs (ie those that are paid by both employers and employees and that arise on earnings) that are due on earnings paid prior to the TUPE transfer

  4. account to HMRC for Class 1A NICs (ie those that are paid by employers and that arise on the provision of benefits in kind) if the transferor is the entity that makes the 'last (or only) relevant payment of earnings' in that tax year. This is likely to be the case when a TUPE transfer occurs in the final weeks of a tax year (as the transferee is unlikely to make a post-transfer benefit in kind payment)

  5. account to HMRC for Class 1B NICs (ie those that are paid by employers on items included in

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