Employment Tax

Transfer of rights and liabilities

Produced by Tolley in association with Dr John McMullen, Partner, Stone King LLP and Visiting Professor of Law, Durham University
  • 21 Dec 2021 16:42

The following Employment Tax guidance note Produced by Tolley in association with Dr John McMullen, Partner, Stone King LLP and Visiting Professor of Law, Durham University provides comprehensive and up to date tax information covering:

  • Transfer of rights and liabilities
  • Liabilities in relation to transferring employees
  • Terms that cannot be replicated
  • Pensions
  • Collective agreements
  • Trade union recognition
  • ICE consultation bodies
  • Liabilities for pre-transfer dismissals
  • Liability for transferor’s failure to inform and consult

Transfer of rights and liabilities

Liabilities in relation to transferring employees

Following a TUPE transfer, the transferee acquires:

  1. all rights, powers, duties and liabilities under or in connection with the contracts of employment of transferring employees

  2. liability for all pre-transfer acts and omissions of or in relation to the transferor in respect of transferring employees or their contracts of employment

SI 2006/246, reg 4(2)

Most employment terms are protected by TUPE. Transferring employees retain continuity of service for determining eligibility to claim unfair dismissal, statutory redundancy payments etc. They also retain their existing terms and conditions, except those relating to old age, invalidity or survivors' benefits under occupational pension schemes.

In addition, the transferee inherits liability for all acts or omissions by the transferor (or an earlier employer) in relation to transferring employees, except for criminal liabilities (eg health and safety offences). These could include:

  1. personal injury claims

  2. discrimination claims

  3. arrears of wages

The transferee also inherits the right to claim for pre-transfer personal injuries to transferring employees under the transferor’s compulsory personal injury liability insurance.

Public sector employers do not have to carry this type of insurance and instead self-insure. As this could put employees transferring out of the public sector in a worse position than private sector ones, TUPE provides that the transferor and transferee are jointly and severally liable for personal injury claims relating to pre-transfer employment where the requirements for compulsory liability insurance do not apply.

Terms that cannot be replicated

Benefits of substantial equivalence must be provided to replace terms that

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