Elite Personnel temporary staff are all employed under PAYE via ourselves, if you are using an agency that uses Umbrella companies to payroll please read below.
The draft legislation, expected to be published in July 2025, will provide greater clarity on the specific compliance obligations for recruitment agencies. However, a few weeks ago, HMRC met with key stakeholders within the industry to discuss the future of compliance within the umbrella sector and it now appears as though HMRC are intending to introduce joint and several liability between umbrella companies and recruitment agencies. This would be a clear shift from the previous route of Option 3 of the umbrella company changes, as announced in the Autumn Budget 2024.
To summarise briefly, the key features of Option 3 previously were as follow:
- The recruitment agency, rather than the umbrella company, would be responsible for deducting and remitting income tax and NIC’s to HMRC for workers employed through umbrella companies.
- The responsibility for operating PAYE and ensuring correct tax deductions falls on the recruitment agency or end client.
Simplistically, joint and several liability is a principle where multiple parties are each fully responsible for the entire obligation, debt, or damage, allowing the claimant to pursue any or all of them for the full amount. What is therefore now proposed is that agencies could be held jointly and severally liable for any tax shortfalls related to umbrella company operations and crucially might not have a statutory excuse to shift or mitigate the liability.
The primary responsibility for any shortfalls will lie with the lead agency, defined as the agency that holds the direct contract with the end client, but a key shift from the original Option 3 is that all the partners in the supply chain could potentially now be at risk of liability but we would need to consider the wording in the legislation to understand the potential impact.
Once published, it is unlikely that any significant changes will be made to the draft legislation before being included within the Finance Act, as it would already have passed through consultation.
As it now appears to be a done deal, how do recruitment agencies ensure to stay compliant if they are intending to continue using umbrella companies post April 2026?
Are you complaint? Talk to us now to discuss your requirements knowing that you will be compliant via Elite