What it will (probably) mean for recruitment businesses
The Finance Bill 2026 has not yet been finalised or published, but one of the provisions which will impact recruitment businesses with effect from 6th April 2026 needs preparing for now.
It is currently intended that from that date a recruitment business will be responsible for ensuring that any umbrella company it uses to pay an agency worker’s PAYE income tax does pay it, on time, and in full to HMRC.
If the umbrella company doesn’t, the recruitment business will be jointly & severally liable to HMRC for whatever is unpaid. That means that HMRC can collect it all from the recruitment business, and need not even pursue the umbrella company.
At the moment it looks as if the legislation only applies to PAYE, not to NICs.
Once we see the final legislation Cognitive Law will help you revisit your umbrella company contract, not least to shore up indemnities to minimise your risks. We will also scrutinise any contracts that umbrella companies ask you to sign in place of yours.
It is unlikely, however, that recruitment businesses will be able to remove all the risk otherwise the legislation won’t be worth the paper it’s written on.
In the meantime we are advising that in preparation you should:
- Audit your existing umbrella PSL. Carry out due diligence on them to ensure compliance, and don’t deviate from that list.
- Have a formal umbrella company policy which all your consultants are trained on, making failure to comply with it a disciplinary offence. (We have raised this previously in the context of the Criminal Finances Act and the Bribery Act.)
- Potentially consider taking payroll in house to minimise exposure.
Watch this space for further guidance, but if you have any queries in the interim please don’t hesitate to contact us. You can email me direct on lucy.tarrant@cognitivelaw.co.uk or call 0333 400 4499.