Compliance Today, Not Tomorrow

In light of proposed government changes, recruitment agencies will soon be responsible for PAYE tax and National Insurance contributions when engaging umbrella companies to supply temporary workers.

The shift emphasises the need for recruitment businesses to ensure compliance with their legal and tax obligations, especially as these responsibilities will have significant consequences if not managed effectively.

However, even though the legislative changes won't take effect until April 2026, recruitment agencies shouldn't be lulled into a false sense of security.

The time for compliance is now, not tomorrow.

Employment Businesses are Already Responsible for Compliance

While legislation to legally make agencies responsible for PAYE tax and national insurance will not take effect until 2026, the government already holds employment businesses responsible when working with umbrella companies. Its guidance notes, "Responsibilities for employment businesses working with umbrella companies," support this stance.

As you would expect, the guidance identifies the agency's responsibilities for laws like the Employment Agencies Act 1973 and Agency Workers Regulations 2010. However, it also specifies the need for agencies to conduct due diligence on any umbrella companies they engage with.

The guidance confirms that agencies involved in non-compliant supply chains that do not take reasonable measures to avoid this can face serious consequences. The notes also confirm that claiming to be unaware of non-compliance is not a defence.

The Stakes are Higher Now

HMRC has been focussing on non-compliance in the umbrella sector for some time, and its list of named tax avoidance schemes, promoters, enablers, and suppliers has been growing weekly.

With so many schemes already active in the marketplace, the risk of agencies being found complicit in enabling tax avoidance schemes is increasing daily. The risks are high and immediate for employment businesses that haven't conducted due diligence and don't understand their supply chains adequately. To safeguard against these risks, agencies should conduct comprehensive due diligence urgently and then review regularly.

Waiting for the legislation to change in 2026 may be too late.

Champion. A Risk-Free Solution

Champion Contractors remains dedicated to supporting recruitment agencies in achieving complete compliance through trusted and transparent umbrella payroll services.

Our FCSA accreditation and SafeRec certification ensure that we meet the highest standards set by the industry and operate transparently, compliantly and legally with all UK tax legislation.

Partnering with Champion Contractors will eliminate any risk of non-compliance today and position your business perfectly in preparation for the legislative changes in 2026.

For more information, contact the Champion team on 0161 703 2549 or email info@championcontractors.co.uk.