​​In April 2026, a major shift in UK tax compliance will come into force. HMRC is introducing joint and several liability (JSL) for PAYE in umbrella company arrangements. This means HR, Finance, and Procurement leaders can no longer assume tax errors are limited to their suppliers; liability can now flow directly to them.

At a recent webinar, experts Rebecca Seeley Harris, Employment Status & IR35 Expert, and Rusty Andrade, General Counsel & VP of Legal and Compliance at Worksome, unpacked what’s changing, how it impacts businesses, and what leaders can do now to prepare.

Why This Reform Is Happening

The umbrella market has long faced compliance challenges, including cases where hundreds of millions in unpaid taxes were siphoned away by bad actors. In response, HMRC has chosen to tighten tax policy before introducing broader regulation.

Key driver: if umbrella companies fail to remit PAYE and NIC, HMRC will now pursue others in the chain, recruitment agencies, MSPs, or even end clients, for the full amount.

What the Law Says

• Joint and Several Liability: HMRC can recover 100% of unpaid tax from any party in the chain, not just the umbrella.
  
  
• Absolute Liability: There is no statutory defence (such as “reasonable care”) available. Even with due diligence, businesses remain on the hook.
  
  
• Scope: Applies to umbrella companies, but also to agencies that effectively act as employers.
  
  
• Timing: Enforcement begins April 2026, though consultation on umbrella regulation continues this autumn. 

Implications for Businesses

For agencies and end clients, the legislation introduces a new level of accountability that makes ongoing due diligence essential. 

Umbrella partners will need to be carefully vetted, with checks such as accreditation, payslip auditing, and payroll validation becoming standard practice. 

Larger enterprises with complex, multi-layered supply chains face an even greater challenge, as HMRC may bypass intermediaries altogether and pursue the entity with the greatest ability to pay. 

For workers, the direct impact is limited, but the reforms should create a more transparent and compliant environment that reduces risks like unpaid holiday pay or disguised remuneration schemes.

Compliance in Practice

Under the new rules, companies must be audit-ready at all times. This means being able to produce complete and verifiable payroll and tax records within 24–48 hours of an HMRC request. Clear documentation is critical, including evidence of PAYE and National Insurance contributions, employer references (ERNs), contract flows, and ongoing supplier validation. 

Technology will play a key role in making this possible, with platforms like Worksome providing real-time data, automated due diligence, and streamlined access to audit-ready records.

What Leaders Should Do Now

The first step for leaders is to map their supply chain and establish exactly where contractors are engaged and how taxes flow through the system. Contracts should be reviewed to clearly assign responsibilities and clarify liabilities. Supplier vetting must also be strengthened, with organisations only working with reputable umbrella partners that can demonstrate compliance on an ongoing basis. 

Finally, HR, Finance, and Procurement teams need to align internally, building readiness to manage this liability shift and ensuring everyone understands the risks and processes involved.

FAQ: The New Umbrella Company Rules

Q: What does “joint and several liability” actually mean?
It means HMRC can go after any party in the chain (agency, MSP, end client) for the entire unpaid tax bill, not just their “share.”

Q: Who is liable under the new rules?
Umbrella companies remain liable first, but agencies and end clients are also in scope. HMRC will likely pursue the entity with the resources to pay.

Q: When does this come into effect?
The new rules will apply from April 2026. Secondary legislation and regulatory consultations are expected over the next 8 months.

Q: What about workers? Will they be chased for tax?
No. Unlike previous loan charge issues, liability now sits with businesses, not individual contractors.

Q: What does “audit-ready” mean?
Being able to produce complete, verifiable payroll and tax records within 24–48 hours of HMRC request. This requires proactive data management, not reactive scrambling.

Q: What’s the one most important step to take now?
Begin mapping your supply chain and vetting providers. Identify red flags early, such as payslips missing holiday pay, and establish ongoing due diligence processes.

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👉 Bottom line: April 2026 may feel far away, but preparation must start now. Due diligence, documentation, and supply chain visibility are no longer optional, they’re business-critical.