Recent weeks have brought some welcome news for the employment agency sector with the government appearing to retreat from its original proposals that agencies would become fully responsible for operating PAYE on payments to any workers in their supply chains from April 2026. Instead, a concept of ‘joint and several’ liability has been proposed.
However, HMRC remains focused on tackling non-compliance among umbrella companies – and its latest campaign is one that agencies and end clients can’t afford to ignore.
In Spotlight 71, HMRC issues clear warnings to workers about the risks posed by umbrella companies that promote tax avoidance or fraudulent schemes to agency workers and contractors.
This includes workers being unknowingly moved between companies that fail to deduct and pay the correct amount of tax and National Insurance.
Workers caught up in these schemes can face unexpected tax bills, loss of access to statutory benefits, or even HMRC enforcement action – even if they weren’t aware of the issues at the time.
Employment agencies, therefore, need to remain vigilant when outsourcing labour requirements.
Workers may approach agencies or clients with questions about their umbrella engagement. HMRC’s guidance alerts workers to look out for red flags such as:
Are workers being moved between companies without knowing – have they seen changes in contacts and names on payslips, received untaxed payments, paid by a different company to their contract
They could owe HMRC money or lose access to state benefits if an umbrella does not appropriately report earnings and account for tax to HMRC
Actions workers should undertake: read contracts carefully, use their HMRC Personal Tax Account to check HMRC records match payslips, report suspicious activity to HMRC.
With April 2026 changes on the horizon, HMRC is pushing to root-out unscrupulous parties that are looking to profit now.
At Dains, we can support you in:
Undertaking due diligence on your labour supply chain – this remains your best protection in the event of an HMRC enquiry.
Materials you can provide to workers to allow them to check their own tax position via setting up a Personal Tax Account.
If you have any concerns or would like to discuss your position, our team is here to help.