How Should Recruitment Agencies Choose an Umbrella Company?
Picking the wrong umbrella now carries financial risk. From April 2026, JSL makes agencies liable for unpaid PAYE. New JSL rules mean agencies share HMRC's financial risk when their umbrella fails to pay. Umbrella choice is no longer just a supplier decision. It's a legal one.
Why does umbrella choice now carry legal risk?
From 6 April 2026, Joint and Several Liability (JSL) rules make agencies jointly responsible for unpaid PAYE if their umbrella fails to pay HMRC. If your umbrella underpays tax, HMRC can come after your agency for the difference. Choosing the wrong umbrella is no longer just a reputational risk. It's a direct financial and legal liability.
Before April 2026, agencies faced reputational damage from non-compliant umbrellas. That was bad enough. Now HMRC has legal powers to pursue agencies directly. It can recover the tax their umbrella didn't pay. You don't have to be involved in the non-compliance. You just have to have used that umbrella.
The mechanics are straightforward. Your umbrella collects PAYE from contractors. If they pocket it instead of paying HMRC, HMRC can recover it from you. The liability is joint. That means they don't need to exhaust the umbrella's assets first. They can come straight to your agency.
Read our full JSL guide for agencies to see how the rules work.
What does FCSA accreditation mean for agencies post-JSL?
The FCSA (Freelancer and Contractor Services Association) independently audits umbrella companies against strict compliance standards. FCSA-accredited umbrellas run genuine PAYE, pay HMRC correctly, and don't use tax-avoidance schemes. For agencies managing JSL exposure, using an FCSA-accredited umbrella is one of the strongest due diligence steps you can take.
FCSA membership isn't self-declared. Umbrellas go through a structured audit process. Auditors check payroll accuracy, HMRC payment records, and contract terms. They also verify how deductions are communicated to contractors. Umbrellas that fail lose accreditation.
For your agency, that means a documented, independent check has already happened. If HMRC investigates your supply chain, FCSA accreditation shows you acted responsibly. That matters when joint liability is in play.
See our guide on what makes an umbrella company compliant in the UK.
Why does Professional Passport accreditation matter?
Professional Passport is a separate independent accreditation body. It audits umbrella companies against its own compliance framework, covering PAYE operations, worker rights, contract terms, and transparent payroll practices. An umbrella with Professional Passport approval has passed a second, independent compliance check.
The two bodies don't share audit results. Passing one does not mean you pass the other. Holding both means clearing two separate compliance barriers. Two different auditors confirmed the same thing. That's a materially stronger position than holding just one.
Professional Passport also focuses on fair treatment of workers. That matters to agencies too. Workers paid correctly and treated fairly don't come back to you with complaints.
What does dual accreditation mean for your due diligence?
An umbrella holding both FCSA and Professional Passport accreditation has passed two independent compliance audits. For agencies, this is the strongest form of third-party due diligence available. It shows the umbrella runs compliant PAYE, pays HMRC correctly, and treats workers fairly. Both bodies verify this separately.
Post-JSL, agencies need documented proof they chose responsibly. Dual accreditation gives you that proof. You can show HMRC, clients, and contractors that you applied a rigorous selection standard. One accreditation is good. Two is a credible defence.
DASA Umbrella holds both FCSA and Professional Passport accreditation. Very few UK umbrellas hold both. That dual status is what makes DASA's compliance position stand out for agencies managing JSL risk.
What should you check before signing with an umbrella?
Beyond accreditation, you need to run your own checks. Start with the basics: Companies House registration, active VAT number, and valid employer's liability insurance. If they can't produce these immediately, don't proceed.
Next, look at take-home pay claims. Any umbrella promising contractors 80% or more take-home is signalling a problem. Legitimate PAYE umbrellas can't deliver those numbers without using non-compliant tax arrangements. Walk away.
Ask to see a sample payslip. It should clearly show gross income, employer NIC deductions, employee NIC, and income tax. Net pay must be visible too. No unexplained "admin fees" or vague "employment costs." Every deduction must be visible.
Use the DASA umbrella pay calculator to cross-check take-home for any rate. If the numbers don't match a proper PAYE model, that's a red flag.
Download our JSL due diligence checklist for agencies.
What questions should you ask any umbrella company?
Ask these questions before adding any umbrella to your Preferred Supplier List. Poor answers or evasion are grounds to reject them outright.
1. Are you currently FCSA-accredited? Ask them to confirm the date of their last audit. Lapsed accreditation counts as no accreditation.
2. Are you currently Professional Passport approved? Same rule applies. Ask for current evidence, not historical claims.
3. Can you show us your last HMRC RTI submission record? RTI (Real Time Information) filings prove they're reporting payroll to HMRC on time. If they resist this question, that tells you everything.
4. What is your process when a contractor disputes their payslip? Slow or evasive answers mean contractor complaints will land back on your desk.
5. How do you handle late timesheets from agencies? Contractors still need to get paid. Find out how they manage the process when your team misses a deadline.
6. What documentation can you provide if HMRC queries our supply chain? A compliant umbrella will have clear, ready answers. A non-compliant one won't.
7. Do you run any non-PAYE payment models? The answer must be no. Anything involving loans, credits, or offshore structures is a scheme.
Keep written records of the answers. If HMRC ever queries you under JSL rules, these records are your defence.
See our agency umbrella page for what DASA offers agencies directly.
FAQ
What is Joint and Several Liability for recruitment agencies?
From 6 April 2026, JSL rules make recruitment agencies jointly responsible for unpaid PAYE if their umbrella company fails to pay HMRC. HMRC can recover the unpaid tax directly from the agency.
What is FCSA accreditation for umbrella companies?
The FCSA independently audits umbrella companies against strict compliance standards. Accredited umbrellas run genuine PAYE, pay HMRC correctly, and avoid tax-avoidance schemes.
What is Professional Passport accreditation?
Professional Passport is a separate independent body that audits umbrella companies against its own compliance framework covering PAYE, worker rights, and transparent payroll practices.
Why does dual FCSA and Professional Passport accreditation matter?
Dual accreditation means an umbrella has passed two separate independent compliance audits. For agencies, it's the strongest available evidence of a compliant umbrella and a documented defence under JSL rules.
What should recruitment agencies check before choosing an umbrella company?
Check Companies House registration, VAT number, insurance, FCSA and Professional Passport accreditation, sample payslips, and take-home pay claims. Any umbrella promising 80%+ take-home is a red flag.
How do JSL rules affect agency due diligence?
Post-JSL, agencies need documented proof they chose their umbrella responsibly. Written records of due diligence checks, accreditation verification, and sample payslips all form part of a credible compliance defence.
