In the UK's temporary labour sector, maintaining a compliant supply chain has never been more vital, or more complex. As recruitment agencies, MSPs, and end clients navigate the evolving regulatory landscape, they must understand the schemes that pose a reputational or financial threat.
In this new series of articles, Champion is highlighting typical schemes that, under the incoming joint and several liability (JSL) legislation, will pose a financial risk to agencies, MSPs, and end clients.
The first scheme that we are highlighting is the Mini Umbrella Company (MUC).
What is Mini Umbrella Company Fraud?
MUC fraud involves the creation of multiple small limited companies. Rather than have one large company employing all workers, the workforce is split across many smaller companies. These "mini" umbrellas are structured to take advantage of small business tax incentives, such as the Flat Rate VAT Scheme and the Small Business Employment Allowance, therefore reducing tax revenues.
Workers are paid through these mini umbrellas, complicating the supply chain and obscuring the ultimate employer. This setup can also make it challenging for workers to understand who is responsible for their pay and benefits.
Common Signs of MUC Fraud.
- Short-lived businesses: Individual companies in the supply chain have a short lifespan and are frequently dissolved and replaced.
- Unusual names: Multiple companies set up at the same time with similar or nonsensical names.
- Foreign national directors: Directors with no prior experience in the UK labour market often replace UK residents after a short period.
The April 2026 Turning Point: Joint and Several Liability
While HMRC has already deregistered tens of thousands of MUCs, many still operate within the sector. However, the risks associated with MUC schemes are about to increase significantly for agencies, MSPs and end clients.
From April 6, 2026, the introduction of JSL for PAYE and National Insurance means that if an umbrella company is found to operate a MUC scheme, HMRC can legally recover any PAYE and NI liability from the "relevant party" in the supply chain, typically the recruitment agency, MSP, or the end client.
How Can Agencies, MSPs and End Clients Protect Against JSL?
To protect themselves from the risks of JSL, agencies, MSPs, and end clients must progress beyond basic questionnaires and adopt a culture of detailed, robust, and continuous due diligence.
- Verify Your Partners: Work only with reputable, transparent, and accredited umbrella providers that can demonstrate compliance.
- Monitor for Red Flags: Be alert to unusual company names, high director turnover, and frequent worker movement between entities.
- Be clear about payment: Know who pays your workers and how.
- Educate Your Teams: Ensure your recruitment and payroll teams understand the risks and can identify the signs of a fragmented workforce.
Champion's Commitment to Compliance
Champion Contractors has always been committed to compliance and transparency, having been FCSA-accredited since 2018 and SafeRec-certified since 2023. We welcome the JSL legislation as a necessary step to levelling the playing field and protecting the entire temporary labour ecosystem.
Further detailed guidance can be found at https://www.gov.uk/guidance/mini-umbrella-company-fraud.
If you have any questions or need further guidance, please contact us. Our team of experts at Champion Contractors will be happy to discuss how we can help you and your clients avoid mini umbrella schemes and remain compliant.
You can contact the Champion Contractors team on 0161 703 2549 or email info@championcontractors.co.uk.