The Freelancer & Contractor Services Association (FCSA), of which Champion is an accredited member, has welcomed the draft legislation published on 21 July 2025, which will form part of the Government's Finance Bill for 2025/26. The new measures, set to take effect from 6 April 2026, are designed to strengthen compliance across the contingent labour market.
A More Balanced Approach to Compliance
The draft legislation sets out how HM Treasury and HMRC plan to deliver on the Chancellor's Budget commitment to tackle non-compliance in labour supply chains. The Government has confirmed it will adopt the Statutory Debt Transfer (Contingent Liability) Model, a proposal supported by the FCSA.
Under this model, recruitment agencies and Managed Service Providers (MSPs) will become Jointly and Severally Liable for unpaid tax where they have engaged with a non-compliant umbrella or payroll intermediary. Importantly, recruiters are not being deemed the employer, a key distinction that avoids unnecessary administrative upheaval.
No Disruption for Compliant Umbrellas
The FCSA states that compliant umbrella companies have nothing to fear from the proposed legislation, and their contractors can continue to benefit from continued umbrella employment.
The real impact, according to the FCSA, will be on non-compliant operators whose tax avoidance models will be undermined as agencies and end-clients seek to mitigate liability risk.
Clearer Definitions and Future Considerations
The draft legislation also provides long-awaited definitions of “Umbrella Company” and introduces a new category, “Purported Umbrella”, to capture fraudulent or non-genuine operations such as mini-umbrella schemes. These definitions are broad and, encouragingly, align with the Employment Rights Bill, which will also regulate umbrella companies through secondary legislation yet to be published.
Overall, the FCSA sees the draft Finance Bill as a significant step forward for compliance and transparency in the UK's contingent labour market, and a welcome sign that the Government has listened to industry concerns.
As an FCSA-accredited umbrella company, Champion supports the assessment provided in the FCSA's response. We'll continue to work closely with the FCSA to ensure that we, and our agency partners, are fully briefed and prepared for the legislative changes in April 2026.
For further information on the draft Finance Bill 2025/26, please contact the Champion team on 0161 703 2549 or email info@championcontractors.co.uk.