In Kuehne + Nagel Drinks Logistics Ltd v HMRC a tribunal has held that lump sums paid to employees on the transfer of a business that were made partly to compensate the employees for the loss of pension rights and partly as an incentive for the employees to work willingly and without industrial action were taxable as employment income. The two reasons were bound together and were not separable. Had the payments been apportioned separately to each item, the approach may have been different and it is more likely that a payment relating to loss of benefits could have been made free of tax. This case provides useful guidance on the treatment of payments to employees on a transfer of an undertaking. A desire to avoid industrial action will often arise in a TUPE situation and the appropriate attribution of any payments made to employees should be carefully considered.