HM Treasury to Introduce Joint & Several Liability for Umbrella Company Tax Compliance
The government is introducing joint and several liability for umbrella companies' tax compliance. Discover what this means for UK contractors and how to protect your business going forward.

Overview
HM Treasury and HMRC have indicated that, beginning April 2026, tax compliance in the umbrella employment sector will shift under a “joint and several liability” (JSL) regime. Under this change, if an umbrella company under-deducts tax, liability won’t only rest with it. Instead, recruitment agencies—and if no agency is involved, the end-client—will be equally accountable.Lead Agency Accountability
Responsibility will be primarily borne by the “lead agency,” defined as the agency directly contracted with the end-client. This ensures accountability throughout the supply chain and marks a clear tightening of regulation around umbrella arrangements.Industry and Expert Responses
Compliance specialists and umbrella industry leaders have cautiously welcomed the move:- Seb Maley (CEO, Qdos) noted a “collective sigh of relief” among both umbrellas and recruiters, as agencies will no longer have to operate PAYE directly—but they must now carefully vet compliance in their supply chains.
- Crawford Temple of Professional Passport emphasised agencies “will have no excuses” and must understand their newly elevated liabilities.
- Rebecca Seeley Harris (Re:legal Consulting), confirming JSL will be “absolute” with no statutory defense, expects draft legislation in July, followed by regulatory consultation in the autumn.
- The Freelancer & Contractor Services Association and FCSA’s Chris Bryce support the policy, appreciating HMRC and HM Treasury’s engagement.
- July: Draft legislation released (“L-Day”), defining precise obligations and liabilities.
- Autumn: Department for Business & Trade publishes regulatory proposals—likely introducing umbrella licensing under the Fair Work Agency.
- April 2026: New compliance rules take effect, making agencies and clients equally enforceable for umbrella compliance.
- Agencies and clients must enhance due diligence—identifying rogue umbrella companies is now a legal necessity.
- Umbrella providers can leverage this reform as a competitive advantage—compliant firms will be favoured by cautious recruiters.
- Contractors should continue verifying that PAYE deductions and National Insurance are correctly applied, as mistake liability still exists under JSL.
Implementation Timeline & Legal Basis
The government plans to insert a new chapter in the Income Tax (Earnings and Pensions) Act (ITEPA)—distinct from Section 44—explicitly outlining JSL. A “statutory transfer of debt” mechanism may further streamline enforcement, allowing HMRC to collect directly and swiftly. Draft text is expected mid‑July, with accompanying full guidance in the autumn.Next Steps
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