Why JSL for umbrellas isn’t gravely concerning us recruiters

Earlier this month, contractor recruitment representatives, including APSCo, met with HMRC and HM Treasury to discuss the latest developments around umbrella company tax reform, writes Tania Bowers, global public policy director at the Association of Professional Staffing Companies (APSCo).

The ironing out of draft umbrella tax legislation continues

The June meeting was insightful.

And so, we have since continued our collaboration with the relevant representatives, as the finer details get ironed out ahead of confirmation of the umbrella company tax legislation, currently due to apply from April 6th 2026.

2026-27 still looks like the starting pistol for umbrella tax reform

It was valuable for recruitment industry stakeholders to see the direction of travel that the umbrella company tax regulation is going in. But it will be clearer once the draft Finance Bill is published in July.  

This expected timeline indicates that, despite calls for a delay, it remains highly likely that the legislative changes will apply to umbrellas from the 2026-27 tax year.

How we expect Joint & Several Liability to operate

The big change from HMT is Joint & Several Liability (JSL), which, in effect, holds more than one party accountable for contractor tax determinations and payments.

In this context, Joint & Several Liability passes responsibility up through the supply chain, meaning that the staffing firm with the contract with the client, or the end-client if there is no recruiter involved, will be liable alongside the umbrella company -- in certain situations at least.

It is also probable that umbrella companies will continue to be able to run payrolls using their own employment reference numbers, which will certainly ease the transition.

Technical versus significant issues

Perhaps one of the crucial points to bring to the fore is that contractor recruitment agencies are not set to ‘bear the brunt’ of everything under the current iteration of the April 2026 legislation, as far as we understand it.

Rather, where there are technical faults in systems or processes that have resulted in a PAYE or NICs error, mis-payment or any similar scenarios, HMRC may go directly to the umbrella company to address the issue.

Staffing agencies won’t necessarily be held liable for these faults.

HMRC’s radar

Recruiters (or the end client, should there be no staffing business in the chain) will be on the radar of HMRC if there are more significant issues, such as those related to ongoing contractual agreements, which create further problems.

For example, incorrect tax collections or payments and fraud.

Improving PSL requirements

The changes that JSL introduces will hopefully deliver more stringent requirements and robust assessments of Preferred Supplier Lists (PSLs).

The discussions we’ve had with HMRC have indicated that improving supply chain behaviour is the target, which means that recruiters and end-clients who follow appropriate compliance reviews of their umbrella partners are less likely to receive unwanted attention from HMRC.

Of course, HMRC data transparency will be key to achieving this, and APSCo has stressed this in its conversations with HMRC and HMT.

Preparation for agencies with umbrella partners is key

We are also working closely with our member agencies to keep them in the loop and help them plan now for the potential changes when they come into effect on April 6th 2026.

It’s important that staffing companies prepare as soon as possible for these legislative changes, which we expect will be confirmed within the next month.

At that stage, we will have an opportunity to provide technical feedback on the draft bill, in addition to HMRC looking to engage with our member agencies later in 2025.

Focusing on the contractor

The sentiment we’ve seen from our recruitment members so far isn’t necessarily one of grave concern -- largely because it will ensure that only the most stringent umbrella companies are being engaged, which, in turn, is better for all in the contractual supply chain.

It will also, on paper at least, improve the experience of contractors, which the recruiters we work with are keen to safeguard.

Devil is (bound to be) in the detail…

However, as with any change in regulation, the devil is in the detail.

We have a clear idea of the direction of travel that HMRC and HMT intend to take with these umbrella company tax reforms, and we will continue to work closely with them to inform and guide the finer points for a fairer process for all.