One of the niggly little issues that often arises when there is a TUPE transfer is around the issuing of P45s (or not) to those staff whose employment has transferred.  Often the transferor, who has just seen a group of employees depart, or their payroll provider will insist that they are going to issue P45s to the staff. This is the wrong approach and just upsets people.

There are two approaches to take depending on the circumstances. One is for the new employer to just provide HMRC with a spreadsheet of the information that would otherwise have been on the P45s, the other is to argue there has been a succession – which route is right will depend on eg:- whether the employees are being subsumed into a much larger payroll or whether just part of an employer’s employees are transferring.

The succession route is deal with in  the PAYE regulations Income Tax (Pay
As You Earn) Regulations 2003 (SI 2003/2682) where Regulation 102 provides that the transfer of a business is deemed to make the transferee or employer who has inherited the employees a successor business. No-one’s employment has ended, so no P45s should be issued.

Under Regulation 102(8) the Transferor has to give the Transferee ‘any
particulars’ needed for them to continue processing payroll.  Often, if
there is a formal document dealing with a transaction, there may also be
contractual promises that, for example, the seller of part of a business has
made agreeing that they will make available such National Insurance and PAYE records as are necessary for the buyer.

Given that this is quite an esoteric area, if this issue arises it may well
be a simple explanation to the Transferor is all it takes to get their
co-operation to provide the information that you need and to prevent them
from erroneously issuing P45s.