In anticipation of the New Year’s compliance special in The Global Recruiter e-magazine we ask three organisations to answer three questions:
Sebastien Sauca, CEO, SafeRec
Q: Do you think the proposed changes are fair and proportionate to the problem HMRC is trying to address?
A: People often talk about these changes as if HMRC is suddenly creating new liabilities for recruitment agencies, but that is not quite right. Agencies have actually carried tax liability when using umbrella companies since 2014 with the introduction of the onshore and offshore intermediaries legislation. What is new, and far more significant, is the move to Joint and Several Liability. Under JSL, there are no statutory excuses, no reasonable steps defence, and no buffer. If the umbrella does not pay the tax, HMRC can pursue the agency directly. That is a fundamental shift. Whether the changes are fair depends on your perspective, but they clearly reflect HMRC’s challenges with persistent non-compliance across parts of the sector. The main purpose of the legislation appears to be driving behavioural change, and on that front JSL has undoubtedly had the intended effect. Agencies are already taking a far more proactive and rigorous approach to auditing their umbrella partners.
Q: What should recruitment companies do now to prepare?
A: Agencies should explore, and truthfully should already have explored, how to audit umbrella compliance in real time. One thing the entire industry agrees on is that what agencies were doing five, four or even three years ago is simply not fit for purpose anymore. The introduction of JSL has shifted the conversation almost overnight. It is no longer about best practice but about self-protection. We are already seeing agencies reassess risk far more seriously, which is why so many have moved to umbrella partners that can evidence compliance through real-time auditing rather than promises, certificates or historic checks. Agencies that begin integrating real data now will be the ones who navigate these changes with confidence rather than concern.
Q: What do you think will be the overall impact on the use of umbrella companies?
A: The use of umbrella companies will certainly continue, but the market is going to become far more polarised. JSL and the wider reforms mean agencies, Managed Service Providers and end clients will no longer tolerate opaque or unverifiable models, because they simply cannot afford to. The umbrellas that succeed will be those that can demonstrate their compliance in real time via an independent third party, not just assert it. Those operating in the grey areas will likely disappear, as the trust-based era of compliance is drawing to a close. Over time, we can anticipate this will create a leaner, cleaner umbrella market built around transparency and auditable data rather than branding or marketing claims. The role of umbrellas remains critical in many supply chains, and the expectations around how they evidence good practice will undoubtly rise sharply.
