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Covid-19 and its impact on business transfers and TUPE

Posted on 6th April 2020 - Our news

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For those that may have embarked on the acquisition of a business prior to the Covid-19 outbreak, its impact on the transaction most likely was not considered in detail, especially when it comes to employees.

On completion of the deal and the transfer of business to the ‘new’ entity, employees of the   acquired business (provided they are transferring with the business and have not opted out of the transfer) will be covered/protected by the Transfer of Undertaking Protection of Employment (TUPE). A situation which in broadest terms protects employees’ rights and safeguards their contractual terms and conditions.

Covid-19 has, for many if not the majority of businesses, led to a significant downturn and loss of revenue, with the lockdown measures preventing employees from working and customers from spending. Therefore, completion of a business transfer could give rise to a situation where ‘new’ employees are unable to or are prevented from working. They may in fact have already been furloughed.

Under the current furlough rules, employees being furloughed must be on the employer’s payroll on or prior to 28th February 2020 in order to qualify for the government backed Coronavirus Job Retention Scheme (CJRS) furlough payments. If employees change employer as a consequence of a business transfer completed after 28th February 2020 then they will be placed on a new PAYE system so would not be eligible for CJRS payments  with their new employer.

Whilst the incoming business may be able to provide evidence of the TUPE to HMRC and may subsequently obtain approval for the scheme, this is most likely going to be very time consuming and protracted.

As there have not been any specific announcements or guidance relating to CJRS and TUPE protections it would be advisable to consider a delay to TUPE until after furlough or have the TUPE transfer date and the transfer of the underlying business agreed after furlough has ceased. It is important however, for all those who might be affected to ensure they are kept up to date with announcements relating to CJRS as the situation may change or evolve.


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