UMBRELLA COMPANY REFORM – HOW AGENCIES CAN PREPARE NOW

ASESA Solutions Ltd- UMBRELLA COMPANY REFORM – HOW AGENCIES CAN PREPARE NOW

Preparing for umbrella company reform

With new umbrella company rules planned from April 2026, recruitment agencies should start considering what steps they may need to take to stay compliant.

Under the proposed reforms, agencies could become responsible for PAYE and National Insurance where umbrella companies fail to meet their tax obligations. This increases the importance of having robust payroll processes and clear oversight of supply chain arrangements.

Why HMRC is making this change

HMRC wants to prevent tax avoidance and protect workers from unexpected tax bills. Umbrella companies can sometimes disappear or fail to comply, so shifting responsibility to agencies or end clients ensures there is a party with sufficient control and resources to meet tax obligations.

Why this matters for recruitment agencies

From April 2026, recruitment agencies may become financially and legally responsible if PAYE or NIC is not correctly operated by umbrella companies in their supply chain. This marks a significant shift in accountability and increases compliance risk.

To prepare, agencies should:

• Review umbrella company arrangements

• Strengthen due diligence and compliance checks

• Ensure contracts clearly define payroll and tax responsibilities

• Assess whether current payroll processes provide adequate control and transparency

Starting preparations early will help minimise disruption and protect agencies from unexpected tax liabilities ahead of 2026.