FCSA Pushes Back Against Professional Passport’s PAYE Proposal

FCSA Slams Professional Passport’s “Option 3” PAYE Proposal — Here’s Why It Fails

On 29 August 2025, the Freelancer and Contractor Services Association (FCSA) issued a blistering condemnation of a proposal by Professional Passport, commonly referred to as “Option 3”, which would shift PAYE remittance responsibility from umbrella companies to recruitment agencies. The FCSA rejects it outright—labeling it a “dangerous distraction, not a solution.” (FCSA)

Below are the nine specific reasons FCSA believes this model is deeply flawed:

1. A Rejected Idea Rehashed

This so-called “solution” isn’t new. It was already considered and dismissed by the government as unworkable, impractical, and unfair during earlier consultations. Reintroducing it won’t magically fix old problems. (FCSA)

2. From Hundreds of Experts to Tens of Thousands of Generalists

Currently, around 600 umbrella companies—staffed with payroll experts and robust systems—manage PAYE for hundreds of thousands of contractors. Passing this responsibility to 24,000 recruiters, most of whom lack payroll infrastructure, would fragment oversight and multiply enforcement challenges. (FCSA)

3. Not All Recruiters Are Fully Compliant

While many are reputable, some recruiters already appear on HMRC’s “deliberate tax defaulter” list, with multi-million‑pound defaults. Shifting liability to recruiters won’t eliminate non-compliance—and may amplify it. (FCSA)

4. Proof Becomes a Minefield

Under this model, umbrellas must prove tax was remitted; recruiters must verify deductions match calculations. This creates endless reconciliation headaches, duplicated checks, and a breeding ground for disputes. (FCSA)

5. Umbrellas Bear the Fallout—Without Control

If a recruiter fails to remit taxes properly, HMRC is likely to pursue the umbrella company—since it holds the PAYE reference number (ERN). Yet umbrellas would have no visibility or control over such payments, potentially facing reputational damage unfairly. (FCSA)

6. Complexity Doubles, Not Reduces

Temporary payroll already handles multiple assignments, statutory benefits, pension contributions, student loans, and holiday accruals. Introducing parallel financial flows for each payroll run doubles the chance of delays, errors, or fraud—and inflates administrative overhead. (FCSA)

7. Cash-Flow Crash Risk for Recruiters

Many recruiters operate on credit terms with umbrellas. Requiring them to remit PAYE to HMRC before reimbursing umbrellas would disrupt these models—and smaller agencies could collapse or resort to non-compliant workarounds. (FCSA)

8. Existing Audit Trails Are Already Superior

Umbrella companies maintain full audit trails and controls. Introducing recruiters into the remittance chain creates more opportunities for error, dispute, and reputational risk—without adding any meaningful enforcement strength. (FCSA)

9. Fragmented Enforcement—Compliance Weakens

Shifting responsibility fractures oversight. HMRC enforcement becomes exponentially more complex when dispersed across thousands of recruiters, hampering the ability to detect, investigate, and penalize non-compliant behavior. (FCSA)

FCSA’s Verdict: A Dangerous Diversion

FCSA clearly rejects Professional Passport’s PAYE proposal, branding it a dangerous distraction rather than constructive reform. The model promises simplification but actually multiplies risk, confusion, and administrative burden across the supply chain. FCSA argues that real reform must build on existing, functional structures—anchored by regulated umbrella companies—not dismantle them. (FCSA)

Summary Table: Why the “Option 3” Model Fails

Final Thoughts

Professional Passport may have intended to plug compliance gaps—but in FCSA’s view, Option 3 doesn’t close loopholes; it opens new ones. For meaningful progress, reform must strengthen, not upend, the structures already in place, while bolstering enforcement and ensuring those tasked with compliance actually have the capacity to deliver.