HMRC change tack on TUPE related National Minimum Wage penalties

Following months of behind the scenes discussions, HMRC have this week confirmed a change in tack in enforcing National Minimum Wage penalties from employers involved in TUPE transfers.

Announced in the HMRC publication “Agent Update 67” (see below) HMRC have confirmed that from 2 July 2018, any liability for historic national minimum wage underpayment or any penalties relating to the underpayment, will be enforced against the new employer, irrespective of whether they were responsible for the underpayment or not. Previously any such back pay or penalties were sought from the transferor for arrears occurring prior to the transfer. This is now not the case.

HMRC do not keep statistics in relation to NMW underpayment following TUPE transfers. The most recent statistics show however that over £1.4m has been recovered for past employees to date.

Employers, in particular transferees in TUPE transfers, should ensure that the correct ELI data has been provided ahead of a TUPE transfer and as much due diligence as possible is done prior to the transfer date. Commercial Managers may wish to reword future indemnities in commercial contracts to take into account the increased risk to businesses from this change of approach from HMRC.

Recommended Reading
HMRC’s update can be read on page 4 of this link.

These notes have been prepared for the purpose of an article only. They should not be regarded as a substitute for taking legal advice.