What is Joint & Several Liability:
From 6 April 2026, new UK tax law will make recruitment agencies – and in some cases end clients – jointly and severally liable with umbrella companies for unpaid PAYE and National Insurance Contributions (NICs) where umbrella companies are used in the supply chain.
HMRC can pursue the full unpaid amount from agencies even if the umbrella company was primarily responsible or has become insolvent.
In arrangements without an agency, the end client takes on this liability.
Why this matters:
Currently, umbrella companies are solely liable for their payroll tax obligations. The reform shifts risk upstream to those who have the most control over labour supply chains.
This is intended to tackle tax avoidance and unpaid tax in the contingent labour market.
How to prepare for April 2026:
1. Stronger due diligence advised
Recruitment agencies should tighten compliance checks on umbrella partners, including:
Verifying PAYE/NIC compliance. A guide for how you can do this can be found here - Umbrella compliance
Assessing financial stability. Umbrellas who are willing to share their financial position provides reassurance that they are financially stable.
Checking accurate registration and tax records
Due diligence processes should become formal, documented, and demonstrable ahead of April 2026.
2. Contract and supply chain changes
Contracts with umbrella companies and end clients should clearly allocate responsibilities, address compliance, and include protective clauses (e.g., contractual indemnities where appropriate). More information about ToB compliance can be found here - Terms of Business requirements
Consider whether umbrella providers meet enhanced compliance standards and whether to limit supply to a trusted panel of fully vetted umbrellas. We can make recommendations if needed.
Raise Summary:
With Raise & our trusted lending partners providing funding to 250+ agencies we are aware of the financial risk to the supply chain and support the increased compliance which this legislation is designed to enforce across the industry.
We will continue to run robust due-diligence on umbrella companies which we work with and are happy to provide clarity on accredited backed firms that we work with and how they can support you in preparation for April 2026.
For help or any questions, please contact us