Joint and Several Liability: Why Recruitment Agencies Can’t Afford to Ignore April 2026
From April 2026, recruitment agencies will face a major shift in risk. For the first time, HMRC will hold agencies jointly and severally liable for unpaid PAYE and National Insurance contributions (NICs) from umbrella companies in their supply chain.
That means if an umbrella company fails to pay its tax bill, HMRC can come directly to the recruitment agency for the full amount, even if the agency has already passed on the money.
It’s a fundamental change that could leave agencies exposed to unexpected tax debts and reputational damage. Here’s what you need to know, and why now is the time to act.
What’s Changing?
Until now, liability for PAYE and NIC has sat squarely with the umbrella company. Agencies had a duty to perform reasonable due diligence, but they weren’t directly on the hook for unpaid tax.
That changes on 6 April 2026. Under the new rules, recruitment agencies (and in some cases end-clients) will be jointly and severally liable with umbrella companies for any unpaid PAYE and NIC.
In plain terms:
- If the umbrella company doesn’t pay HMRC, the agency will be treated as if it failed too.
- HMRC won’t care who was “at fault” — they just want the tax paid in full.
- There is no statutory “reasonable care” defence built into the legislation.
You can read HMRC’s latest guidance here.
Why It Matters for Recruitment Agencies
This isn’t just another compliance tweak. The change strikes at the heart of how agencies engage contingent workers.
- Financial risk
A non-compliant umbrella could leave agencies facing unexpected six-figure tax bills.
- Reputational risk
Clients and contractors will be quick to question an agency’s judgment if HMRC steps in.
- No safety net
Even agencies with strong due diligence processes could still be liable.
- Operational burden
Agencies will need to overhaul their supply chain checks, contracts, and consultant training.
What You Should Be Doing Now
With April 2026 less than 18 months away, agencies need to start preparing today.
Steps to consider include:
- Audit your supply chain
Review every umbrella company you work with. Check financial stability, compliance history, and transparency.
- Narrow your PSL
Limit your approved umbrella list to a smaller group of providers you can genuinely trust.
- Strengthen contracts
Add clauses requiring umbrellas to provide proof of PAYE/NIC compliance, and give you audit rights.
- Train your consultants
Ensure client-facing teams understand the risks and can spot red flags in payslips or worker feedback.
- Explore payroll alternatives
Consider whether bringing payroll in-house or outsourcing to a trusted provider is more cost-effective than relying on umbrellas.
The Bigger Picture
The joint and several liability rules are part of a wider government push to clean up the umbrella sector. A licensing regime is expected in 2027, but agencies can’t wait for that safety net.
Agencies that take action now won’t just reduce their exposure, they’ll also strengthen their position in the market. Demonstrating compliance will be a differentiator with clients who want reassurance their supply chain is watertight.
Final Word
April 2026 may feel a long way off, but it isn’t. Recruitment agencies need to treat this as urgent.
The choice is simple: act now, or risk being left holding the bill for someone else’s non-compliance.
At Intelligent Payroll, we’re already helping agencies review their options and de-risk their supply chains.
If you’d like to discuss how we can help protect your business, get in touch.
=======================================
Still have questions?
We are here to make payroll simpler, safer, and easier to trust. Get in touch if you would like to know more about how this change might affect your business.
For more information, contact us today or book a demo.