The latest webinar from HMRC has brought confirmation of how Joint and Several Liability (JSL) will apply within the labour supply chain, and according to Professional Passport, the message for the recruitment sector is clear: if an umbrella company fails to pay PAYE or National Insurance Contributions (NICs), the recruitment agency will be held liable.
The message aligns directly with the position long advocated by Professional Passport – no level of due diligence, accreditation, or checking removes the liability once PAYE goes unpaid. The only way to neutralise JSL is to pay the PAYE due directly to HMRC.
From 6 April 2026, the Finance Bill will introduce a new statutory framework under Section 61Y of ITEPA 2003, marking the first time Parliament has legislated specifically to regulate the risks posed by umbrella companies in the contingent labour market. The new rules make all “relevant parties” – including umbrella companies, recruitment agencies, and in some cases end clients – jointly and severally liable for unpaid PAYE.
Under this framework, if an umbrella fails to remit PAYE to HMRC, the agency that supplied the worker to the end client will be pursued for the shortfall. Only where no agency exists will HMRC turn to the end client.
“Where PAYE is not properly remitted to HMRC, HMRC will seek payment from the agency that provides the worker to the end client. Where there is no agency in the chain, HMRC will seek payment from the end client,” HMRC confirmed.
HMRC has also made clear that no form of documentation or audit removes this risk. Payslip checks, RTI validations, or proof-of-payment statements from the umbrella do not provide a statutory defence.
“There is no statutory excuse that removes the liability,” HMRC stated.
Even where an umbrella can provide evidence that PAYE has been paid, agencies remain exposed if that information later proves false. As one HMRC response summarised: “In simple terms, no matter what checks you carry out, when there is an issue with payment of PAYE, HMRC will ultimately go after the agency.”
However, there is one practical safeguard. HMRC has confirmed that direct payment of PAYE to HMRC under the umbrella’s PAYE reference completely neutralises exposure to JSL. If the relevant PAYE liabilities have been settled, there is no debt remaining for HMRC to recover.
“If any relevant party has paid the PAYE liabilities to HMRC, there will be nothing to pursue.”
Crawford Temple, CEO and founder of Professional Passport, has welcomed HMRC’s stance on JSL and said: “We have been consistent in our message that Joint and Several Liability is set to change the labour supply chain landscape. In their own words, HMRC has confirmed what we have been saying all along – if an umbrella fails to pay PAYE, the agency will be pursued. There is no statutory defence, no level of due diligence, and no accreditation that protects against JSL.
“The only way to be sure PAYE has been paid is to pay it directly to HMRC. We welcome HMRC’s clarity on this point, as it provides certainty for agencies and underlines the steer we have been providing for many months.
“The countdown to April 2026 is on, and we are urging recruitment businesses to wake up to what is coming and review their supply chains, contractual structures, and payment processes. Don’t take our word for it. HMRC has now spelt it out.
“We would urge all recruitment company directors and end hirers to attend HMRC’s next JSL themed webinar on 17th November 2025 at 13.45. This is the last in the series, and the first two have clearly highlighted HMRC’s intended approach in the “new world” via the questions posed and their answers given.”
