Since 6 April 2026, PAYE accountability for workers supplied through an umbrella company sits with the recruitment agency or, where there is no agency in the chain, the end client. Umbrella due diligence is now the clearest defence an agency has against inheriting a tax liability it did not create. If the umbrella underpays PAYE or National Insurance, HMRC can look up the chain — and expect the agency to explain what it checked, and when.
Why Joint and Several Liability Changed the Risk
The April 2026 reforms introduced joint and several liability (JSL) for PAYE across umbrella supply chains. In plain terms, more than one party can be pursued for the same unpaid tax. HMRC no longer has to chase a defaulting umbrella to exhaustion before it turns to the agency that engaged it.
That shifts the commercial calculation. A cheap margin from an umbrella that cuts corners is no longer the umbrella’s problem alone. The agency that placed workers through it is now exposed to the shortfall, plus interest and potential penalties.
This is a change in where accountability lands, not a change in what compliant operation looks like. A well-run umbrella that pays the right tax on time creates no liability to inherit. The exposure comes from the ones that don’t — and from agencies that cannot show they looked.
What Umbrella Due Diligence Should Cover
Effective umbrella due diligence is ongoing evidence-gathering, not a one-off form at onboarding. HMRC’s expectation is that agencies can demonstrate what they knew about a supplier and how they monitored it throughout the relationship.
At a minimum, agencies should hold documented checks on:
- PAYE and NIC evidence — confirmation that the umbrella operates PAYE correctly, with sample payslips reconciled against assignment rates and hours.
- Deductions transparency — that only lawful deductions are made and that workers receive at least the National Minimum Wage after any permissible deductions.
- Financial standing — the umbrella’s filing history, VAT registration and any signs of phoenixing or sudden restructuring.
- Beneficial ownership — who actually controls the company, and whether directors are linked to previously failed schemes.
- Contractual clarity — written terms setting out who is responsible for what across the chain.
The records matter as much as the checks. A compliance enquiry tests what you can produce, not what you remember doing.
The Preferred Supplier List Is a Control, Not a Convenience
Many agencies run a preferred supplier list (PSL) of umbrellas they will place workers through. After April 2026, that list is a live compliance control. An umbrella that was compliant at onboarding can deteriorate; ownership changes, margins get squeezed, and corners get cut. Periodic re-checking of every PSL member is now part of managing agency risk, not administrative housekeeping.
How FCSA Accreditation Fits the Due Diligence Picture
FCSA Accreditation gives agencies an independent, documented basis for trusting an umbrella supplier. FCSA Members are assessed against detailed compliance standards covering payroll, deductions, worker treatment and financial conduct, and are re-assessed to keep their status.
That does not remove an agency’s own responsibility. JSL sits with the agency regardless of a supplier’s credentials, and no accreditation transfers a statutory liability. What Membership does is narrow the field to umbrellas that have already evidenced compliance to an independent assessor, and give agencies a clear reference point when they document why they engaged a particular supplier.
Checking a supplier against the FCSA Members register is a practical first step in any due-diligence process. It should sit alongside, not replace, the agency’s own ongoing monitoring.
Getting Ahead of Statutory Regulation
The April 2026 JSL rules are the first phase. From April 2027, the Employment Rights Act 2025 brings umbrella companies into formal statutory regulation, with the Fair Work Agency gaining direct oversight. Agencies that build robust due-diligence processes now will not be scrambling to construct them when the regulator’s remit widens.
The habits are the same in both phases: know your suppliers, check them against a recognised standard, monitor them continuously, and keep the paper trail. Agencies that treat due diligence as a one-off box-tick are the ones most exposed under JSL, and least prepared for what follows.
FCSA’s position is straightforward. Compliance in a supply chain is only as strong as the checks behind it. Agencies should engage umbrellas that can prove how they operate — and keep proving it. To confirm a supplier’s status, use the FCSA Members register, and read more on what accreditation involves through FCSA Membership.
Sources
- FCSA, PAYE Changes for Umbrella Companies: The April 2026 Rules — https://www.fcsa.org.uk/paye-changes-for-umbrella-companies-the-april-2026-rules/
- FCSA, Umbrella Regulation in 2027: What We Know and What to Do Now — https://www.fcsa.org.uk/umbrella-regulation-in-2027-what-we-know-and-what-to-do-now/
- FCSA, Payslip Fraud: How FCSA Members Can Evidence Compliance — https://www.fcsa.org.uk/payslip-fraud-how-fcsa-members-can-evidence-compliance/
