Joint and Several Liability - FAQ's

With just six months to go before new legislation comes info force, we visit some key questions we’ve been asked in our discussions with our own supply chain.

My agency doesn’t use Umbrella companies – are we still liable?

Yes – the legislation covers this scenario. If the end client contracts directly with a recruitment company to supply workers (even with no Umbrella company) the end client will be a joint and severally liable party by default. In this setup, the client is seen as acting like the agency in legal terms. So, if the agency fails to pay the correct PAYE tax, HMRC can still hold the client fully accountable for the unpaid amount.

Can we look at re-writing/re-issuing contracts so that it passes on liability?

HMRC has issued a clear stance; what matters is that the PAYE tax is paid, not that a company had a policy or contract in place expecting it to be paid. The concept of JSL means that when more than one party is responsible for a debt, HMRC can choose to recover the full amount from any one of them. If it cannot be recovered from the Umbrella company – it will be passed along the chain. Therefore, a better stance would be to approach this legislation with the compliance and due diligence it requires.

What education should we be providing to the end-clients?

As above, as part of the supply chain, agencies and end-clients cannot escape this new legislation. Therefore, we strongly advise that you speak to clients to make them aware of this and reassure them on your processes/any changes to be made. No Umbrellas in the chain? Show them your PAYE processes. Or even consider introducing Umbrellas into the chain, to share out the liability. Umbrellas already in the chain? More auditing (either in real time or more frequently) may be asked of you/any Umbrellas in your supply chain, so be prepared to share this information. The whole supply chain can expect an uplift in proactive and robust due diligence from all parties, and we will of course be happy to comply with anything that is required.

As an agency, what level of reasonable care should we take in our due diligence?

It’s important to note that this is the biggest shake-up to the supply chain in a while, and therefore a hard line is being taken – it is not to be underestimated. The legislation has stated that there are no statutory excuses, regardless of the reason. JSL is a form of strict enforcement – if the Umbrella doesn’t pay the correct tax, this means that it can be collected instead from the agency or client without needing to prove fault or negligence.

So, to start, ensure your PSL is an Assured Provider List of FCSA accredited providers. A strong, well-documented and proactive due diligence process is essential. Consider real-time auditing tools (we will be announcing our engagement with this very soon) with your Umbrellas, and work with them to ensure trust and mitigate risk. Ask to see contracts, payslips and RTI reports. And lastly, don’t fall for unrealistic incentives – they are not affordable for a compliant umbrella.

Part of my agency is based offshore/overseas – will JSL still apply?

In short, yes - offshore entities in a supply chain will be ignored, with scrutiny on the next closest UK based company in the chain, so the government have sought to cover all bases. 

How far back will this legislation cover?

It’s not retrospective, so the legislation applies to payments made to workers from 6 April 2026.

Are there going to be additional processes put in place to ensure non-CIS workers are not paid as CIS to get around the liability?

Clipper already has a robust CIS process in place in order to determine those who are genuinely self-employed, and working in the construction industry. This process will not be relaxed, and indeed, there is no requirement to relax it, as the rules surrounding CIS have not, and will not change as a result of this new legislation. As we’ve always done and will continue to do, only those who are genuinely self-employed will pass the vetting process. We encourage all agency partners that nothing needs to change in terms of their process also.  

When a candidate benefits from any tax avoidance done by the Umbrella, are they liable to pay any tax shortfalls?

In theory yes, the worker can still be found liable if HMRC pursue them. The new legislation does not change HMRC's existing powers, such as Regulation 81 of the PAYE Regulations, to seek payment from a worker directly. However, part of this overhaul of Chapter 11 of ITEPA is aimed at policing the supply chain more thoroughly, so it’s an ‘easier win’ so to speak for HMRC to go directly to either an agency or end client to recover any unpaid PAYE. Therefore, in practise we may see less personal claims, and instead more funds claimed from businesses instead (similar to the IR35 reforms).

 We'll continue to keep you updated on expected legislation announcements over the coming months. For any additional help, please contact your usual point of contact, or on 01305133170.