The government’s new Abusive Phoenixism Taskforce isn’t just about catching tax dodgers. For recruitment agencies and their supply chains, it signals a fundamental shift in how fraudulent operators will be pursued, and why proper due diligence has never mattered more.
What’s actually happening?
Chancellor Rachel Reeves has committed £25 million over the next five years to help the Insolvency Service tackle rogue directors who abuse the insolvency regime. [GOV.UK] The funding creates a dedicated 50-person taskforce specifically targeting “abusive phoenixism” — the practice where directors deliberately liquidate companies to evade tax and debts, only to reappear under a new company name, free of liabilities.
Directors who deliberately liquidate or dissolve their companies to evade tax will face investigation, [Scottishfinancialnews] with potential disqualification periods of up to 15 years. The Insolvency Service’s track record shows this isn’t empty rhetoric, in 2024-25 alone they secured 77 criminal convictions and more than 1,000 director disqualifications. [Mirage News]
Why this matters for recruitment supply chains
If you’ve spent any time investigating the underbelly of the umbrella market, you’ll recognise the phoenixism playbook. Non-compliant payroll operators have long exploited this gap, running schemes that defraud workers and HMRC, then dissolving before enforcement catches up, only to resurface under a fresh company registration.
Mini umbrella companies often don’t last long, maybe less than 18 months, before they’re shut down for not keeping up with the paperwork. Then new ones pop up to take their place. [Giantgroup]
This isn’t theoretical. FCSA spends considerable time identifying and reporting fraudulent firms to HMRC. The frustration has always been the same, as soon as one firm is shut down another springs up in its place [Theglobalrecruiter], a game of whack-a-mole that achieves nothing without the power to pursue the individuals behind these schemes.
The new taskforce changes that dynamic. Directors can now be investigated retrospectively, even after dissolution, and face personal liability for company debts. The message is clear: winding up your company no longer means escaping accountability.
The supply chain risk hasn’t gone away, it’s getting clearer
Here’s what recruitment agencies need to understand: if your business is using or providing temporary labour, it’s your responsibility to undertake necessary and proportionate due diligence checks. [GOV.UK]
With Joint and Several Liability for PAYE between agencies and umbrellas coming into force from April 2026, the stakes are higher than ever. A fraudulent operator in your supply chain doesn’t just create reputational damage, it creates direct financial exposure.
The new enforcement powers mean;
Rogue operators face genuine consequences. The three-year retrospective investigation window and 15-year disqualification periods create real deterrents. Directors can no longer assume dissolution provides protection.
Supply chain integrity becomes provable. When you work with properly accredited partners, you’re not just ticking a box, you’re creating a documented defence against supply chain liability.
“We didn’t know” stops being an excuse. With expanded HMRC guidance and government investment in enforcement, agencies are expected to know who they’re working with. Plausible deniability is dead.
What should agencies do now?
The enforcement infrastructure is being built. The question is whether your supply chain is ready for scrutiny.
Review your umbrella relationships. If a payroll provider is offering rates that seem too good to be true, ask how they’re achieving them. If workers are being moved between multiple company names, that’s a red flag.
Verify accreditation status. FCSA Accreditation isn’t just a badge, it’s evidence of independent assessment against clear compliance standards. When regulators come asking questions, documentation matters.
Consider real-time verification. Tools like veriPAYE provide ongoing assurance that payroll is being processed correctly, not just a snapshot at the point of onboarding.
Document your due diligence. If you can demonstrate that you’ve taken proportionate steps to verify your supply chain, you’re in a materially different position than agencies who can’t.
The bottom line
The government is investing in catching the people behind fraudulent schemes, not just the schemes themselves. For compliant operators, this is welcome news, it levels the playing field against those who’ve been undercutting the market through fraud.
For agencies, it reinforces what we’ve been saying for years: working with properly accredited partners isn’t a cost, it’s protection. When non-compliant operators can no longer dissolve and disappear, the entire supply chain becomes cleaner.
The crackdown on rogue directors is part of a broader enforcement picture that includes umbrella regulation, Joint and Several Liability, and expanded right-to-work checks. Each piece makes the consequences of non-compliance more certain and more severe.
The operators who treat compliance as optional are running out of places to hide.
