From April 2026, the government's intention to introduce joint and several liability to umbrella company legislation will place Managed Service Providers (MSPs) firmly in the compliance spotlight. The reforms aim to address tax avoidance scheme issues in the supply chain by ensuring that liability for unpaid tax and non-compliance does not rest solely with umbrella companies, but can also extend to the MSPs that facilitate contractor placements.
The implications for MSPs are significant.
The MSP model traditionally relies on recruitment agency suppliers to source and supply workers, meaning they rarely contract directly with umbrella payroll companies. As a result, the compliance standards of those umbrella providers often sit beyond the MSP's direct control. Yet, under the new rules, should a payroll provider fail in its obligations, the MSP could still find itself jointly liable. This shift creates an unprecedented exposure to financial and reputational risk.
To mitigate this, MSPs will need to reassess their approach to compliance within their supply chains. Robust due diligence into the supply chain will be essential, not only on agency partnerships, but also in how those agencies select and work with umbrella providers.
MSPs will undoubtedly be looking at implementing their own preferred supplier lists (PSLs) of umbrella payroll providers, more stringent contractual frameworks, and regular compliance audits.
For MSPs, this represents a significant shift in responsibility and an increase in risk, leaving them with no alternative but to react.
Some MSPs might see the reforms as an opportunity to take the lead and drive compliance in the sector. Embedding compliance at the heart of their service model, MSPs can demonstrate tangible added value to their end clients, as well as safeguard themselves from liability and risk.
Those that take a proactive stance, demanding verifiable compliance credentials from partners, will be better positioned to build trust with clients, agencies, and contractors in an increasingly regulated environment.
At Champion Contractors Limited, we see this legislation as a catalyst for positive transformation. MSPs have the potential to become the sector's compliance gatekeepers, raising standards that benefit all stakeholders.
We're already engaged with many MSPs, agencies, contractors, and end-clients discussing preparation and plans for the introduction of JSL. As an FCSA and SafeRec accredited umbrella payroll company, Champion's compliant and transparent service offering can help MSPs underpin their credentials and reputation with end clients.
For more information, contact the Champion team on 0161 703 2549 or email info@championcontractors.co.uk.