Agencies Up in Arms Over HMRC’s Comments

Why the new JSL rules are another HMRC blunder — and why umbrellas won’t lose a wink of sleep

HMRC has once again managed to turn a simple idea into a bureaucratic circus. The new Joint and Several Liability (JSL) rules, billed as the big clean-up of the umbrella company sector, are being sold as a fix to the long-running problem of tax non-compliance.

But in reality? It’s business as usual for umbrellas — and one more administrative nightmare for agencies.

HMRC’s latest “solution” — a shiny label on a broken system

Under the new rules, set to take effect from April 2026, HMRC can pursue the “top” agency (or in some cases, the end-client) for unpaid PAYE and NIC if an umbrella company fails to hand over taxes.

On paper, that sounds like accountability. In practice, it’s a thinly veiled admission that HMRC can’t — or won’t — enforce the rules against the real culprits.

Rather than tightening regulation of umbrella companies themselves — something promised for years — HMRC has chosen the easy way out: shift the liability to agencies who already operate under layers of compliance requirements.

It’s classic HMRC: when enforcement gets difficult, move the burden to someone else.

Umbrellas won’t change — because they don’t have to

Let’s be clear: the JSL reforms do nothing to change how umbrella companies actually behave. They’re still the employer. They still run payroll. They still decide what to declare to HMRC.

The only real difference now is who gets blamed when things go wrong.

If an umbrella underpays tax, HMRC can conveniently bypass the messy job of tracing the non-compliance and instead target the agency — because proving “joint” liability between two separate legal entities is a legal minefield.

Most umbrellas know this. The clever (or cynical) ones already see the loopholes:

• They can continue operating through complex supply chains and layered sub-contracts.

• They can dissolve or rebrand at the first whiff of an investigation.

• And they know HMRC will more easily extract money from agencies than fight a losing legal battle against a dissolved shell company.

So while HMRC boasts about “new powers,” the umbrellas simply shrug — the real risk has just moved one link up the chain.

Agencies furious — and rightly so

Recruitment agencies are calling this a “policy failure in slow motion.” They’re suddenly being held responsible for something completely outside their operational control.

They don’t run payroll. They don’t process PAYE. They don’t decide tax treatment. Yet under JSL, if the umbrella gets it wrong, the agency foots the bill.

The problem? HMRC knows it’s easier to collect from a UK-registered recruitment firm than from an offshore umbrella that vanishes overnight.

In short: HMRC is outsourcing its enforcement failure to the private sector — again.

As one agency director put it privately, “This isn’t reform — it’s cowardice. HMRC can’t regulate umbrellas properly, so they’re throwing us under the bus.”

Another layer of confusion — but no real reform

The irony is that HMRC is already planning actual umbrella regulation through BEIS and the Employment Agency Standards Inspectorate. That’s due around 2027 — a full year after JSL comes into play.

So rather than waiting to build a coherent, joined-up regime, HMRC is rushing out a half-measure that punishes the wrong party first.

Even compliance specialists have pointed out that the JSL framework is practically unenforceable:

• The definitions of “top agency” and “relevant party” are vague.

• The evidential burden for proving who knew what (and when) is enormous.

• And the vast majority of umbrellas can still operate exactly as before — just with a new scapegoat.

In other words: the cowboys will keep riding, and HMRC will keep missing them.

Contractors: don’t expect miracles

Contractors might be tempted to think JSL protects them. But in reality, it changes nothing.

If their umbrella folds or underpays HMRC, the contractor won’t get their tax back — and agencies will simply become more cautious, passing on new costs or restricting umbrella options.

The compliance risk doesn’t vanish — it just moves further away from the person who caused it.

And let’s be honest — the people who created this mess aren’t the agencies or contractors at all. The loopholes that allow non-compliant umbrellas to thrive were built into HMRC’s own framework. Successive governments have known about these cracks for years but done little to seal them. Instead of fixing the system, HMRC keeps layering new rules on top of the old ones — rules that make life harder for the compliant, while the bad actors keep exploiting the same legal gaps.

A pattern of HMRC missteps

This isn’t the first time HMRC has over-engineered a blunt instrument. We’ve seen it before with IR35, with Managed Service Company rules, and with the Loan Charge — all well-intentioned but clumsily implemented, leaving compliant taxpayers trapped while real offenders slip through.

The JSL reforms are shaping up to be the same story:

• A complex rule nobody understands.

• A liability that targets the wrong people.

• A system that fails to tackle the underlying cause.

It’s policy by optics — not outcomes.

The bottom line

For all the noise, the JSL rules don’t clean up the industry — they just rearrange the targets. Umbrella companies can still do what they’ve always done. Contractors won’t see a real benefit. Agencies are left picking up the tab.

HMRC, once again, gets to look busy while avoiding the hard work of genuine regulation.

Until there’s real licensing, proper oversight, and an enforcement body that can actually track non-compliance at source, these rules are just another passing fad — and one that risks doing more harm than good.