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New measure may impact 700,000 individuals who work through umbrella companies
The Chancellor has announced that a new Chapter 11 will be introduced into Part 2 of ITEPA 2003 to make employment agencies or end clients jointly and severally liable for any amount required to be accounted for under the PAYE provisions, where an umbrella company forms part of a labour supply chain.
Further legislation will be introduced to amend section 4A of SSCBA 1992 to provide HM Treasury with the power to make regulations imposing an ‘equivalent joint and several liability for NICs purposes’.
Joint and several liability will allow HMRC to pursue an agency in the first instance for any payroll taxes that a non-compliant umbrella company fails to remit to HMRC on their behalf. The end client will be liable if contracting directly with an umbrella company.
Once legislated, the changes will be effected from 6 April 2026.
It is estimated that this measure may impact approximately 700,000 individuals who work through umbrella companies.
It is anticipated that some agencies or end-client businesses may decide to operate their own payroll, rather than contract with an umbrella company. In this case, individuals may see a change in the party paying them.
If an agency decides to move a worker onto its own payroll rather than using an umbrella company, the worker may also see their employment status change to that of an agency ‘limb (b) worker’. They will have specific protections through the Employment Agencies Act 1973 and the associated Conduct of Employment Agencies and Employment Businesses Regulations 2003. Agency workers are also protected through the Agency Workers Regulations 2010.
A recent ACCA AB article summarises some of the key upcoming changes on the crackdown on non-compliant umbrella companies.