22 July 2025
As part for Legislation Day, HM Revenue and Customs (HMRC) has confirmed the changes coming for workers supplied via umbrella companies. These changes were announced to a small working group prior; however no official and public confirmation was given at that time from HMRC.
The draft legislation and explanatory notes break down the changes, due to commence for payments made on or after 6 April 2026, as such:
“Legislation will be introduced in Finance Bill 2025-26 to amend part 2 of ITEPA 2003. The legislation will introduce a new chapter 11 into part 2 to make employment agencies or end clients joint 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 Social Security Contributions and Benefits Act1992 to provide HM Treasury with the power to make regulations imposing an equivalent joint and several liability for NIC 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.”
Also of note:
“In the event of there being a number of agencies in a labour supply chain, these new rules apply to the agency that has the direct contract with the end client to supply the worker. Where there is no agency, this responsibility falls to the end client.”
Dave Chaplin, CEO of IR35 Sheild, sums up the draft legislaiton on LinkedIn:
"If a client pays a worker who is providing personal service, via an umbrella which is employing (or expected to be employing the worker), then everyone in the chain between the client and the worker is on the hook for the tax if it ain't paid. If no agency, client is on the hook.
[Edit: For multiple agency chains, the draft statute currently makes the highest agency on the hook, not the lower agencies. And, whilst the client is normally off the hook, if the agency is "connected" (currently undefined) to the umbrella, then then client is on the hook again. These draftings may not survive in their current form.]
"There is also no pecking order. HMRC can use their discretion to go after whichever "relevant party" they want to.
"The legislation does not apply to workers operating via limited companies who are Inside IR35 (Ch8/ch10), or workers on agency payroll (ch7) or those caught with the MSC rules (ch9) - because they are already paying tax like an employee."
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