The UK government has made its intentions clear: the era of "looking the other way" in the umbrella payroll sector is over. With the introduction of Joint and Several Liability (JSL) in April 2026, the financial responsibility for unpaid PAYE taxes is moving up the supply chain.
For recruitment agencies, MSPs and end-clients, this represents a fundamental shift in risk. Here is a detailed assessment of what JSL means for your business and how to prepare for it.
What is Joint and Several Liability (JSL)?
Part of the Finance Bill 2025-26, JSL allows HMRC to hold recruitment agencies, MSPs, and in some cases, end-clients liable for unpaid PAYE and National Insurance Contributions (NICs) if the umbrella company fails to pay.
Crucially, this is a strict liability. Unlike IR35, where "reasonable care" can sometimes provide a defence, JSL shifts the responsibility for the debt to the "relevant party" (the agency) regardless of whether the agency knew of the non-compliance.
A Strategic and Practical Challenge
As our Director, Jim McMeekin, recently noted, this is a C-suite priority. "The risk profile of engaging temporary labour has changed. Business leaders must move away from light-touch due diligence toward a model of continuous, data-led oversight."
From a practical standpoint, Richard Allen, our Senior Sales Manager, emphasises that this change hits the front line of recruitment first. "Agencies need to move fast to rationalise their Preferred Supplier Lists (PSLs). If a provider cannot prove, in real-time, that they are meeting their PAYE tax obligations, they simply shouldn't be on your list."
Building a Robust Due Diligence Process
Effective due diligence for the JSL era should involve:
- Real-Time Auditing: Relying on a yearly audit is no longer enough. Platforms like SafeRec allow agencies to see that taxes have been calculated and paid for every single payslip.
- Transparency of Ownership: Understanding who owns your umbrella partners is vital to avoiding "Mini-Umbrella" fraud schemes.
- Evidence of Payment: Moving beyond "sample payslips" to requesting evidence of RTI (Real Time Information) filings and matching HMRC payment references.
- Terms and Conditions: Updating commercial terms to include compliance and audit requirements.
The Champion Difference
At Champion, we have built an enviable reputation as a safe and trusted partner for recruiters and contractors. We don't just claim to be compliant; we prove it.
As an FCSA-accredited and SafeRec-certified provider, we offer our partners a level of transparency that neutralises the risks posed by JSL. We provide comprehensive due diligence information packs and real-time audit trails, ensuring that when April 2026 arrives, your business is protected, not prosecuted.
If you have any questions or need further guidance, please contact us. Our team of experts will be happy to discuss how Champion can help you and your clients remain compliant and mitigate the risks of JSL.
You can contact the Champion Contractors team on 0161 703 2549 or email info@championcontractors.co.uk.