Umbrella & payroll compliance

For years, what happened inside an umbrella company was legally someone else’s problem. That era is over.

Since 6 April 2026, their tax problem is your tax problem. Recruitment businesses in an umbrella supply chain can now be held jointly and severally liable for unpaid PAYE in that chain. In plain terms: if an umbrella you use fails to pay the tax it deducted from workers’ pay, HMRC can come to you for the money. The only defence that matters in practice is evidence — that you knew exactly who was in your chain and had checked them properly.

What checking properly looks like. For every umbrella and intermediary you use: confirm the company’s identity and directors at Companies House; verify its VAT and PAYE standing; review a sample payslip and reconciliation from assignment rate through to take-home pay; confirm holiday pay is being handled lawfully; watch for disguised-remuneration red flags such as loans or inflated “expenses”; hold a written contract with PAYE warranties and audit rights; and record all of it, dated, reviewed at least every six months. If you cannot draw your payroll chain for any worker on one page, that gap is itself the finding.

Holiday pay is next on the enforcement list. The government is consulting until 22 September 2026 on giving the Fair Work Agency the power to enforce statutory holiday pay from 2027 — with proposals including investigation of up to six years of underpayments and civil penalties. Six years is longer than most agencies’ record-keeping habits. Fix the habit now, not in 2027.

And umbrella regulation proper arrives in 2027. Under the Employment Rights Act, umbrella companies are due to be brought within the regulated framework that has long applied to agencies — with the FWA enforcing. The government has also confirmed plans to define umbrella companies in legislation and bring them within the Employment Agencies Act regime. Agencies that already hold clean due-diligence files will barely notice the transition; agencies that don’t will be doing three years of homework in one winter.

The theme of this whole page is a single sentence: be able to show your working, quickly. Our free 12-point health check includes payroll chain due diligence as point six — and the BIOR Agency Compliance Pack, included with certification, contains the due-diligence log and KID templates that turn this article into a filing cabinet.