From 6 April 2026, recruitment agencies share liability for unpaid PAYE. If your umbrella company does not pay HMRC, your agency can be held responsible. JSL turns umbrella choice from a supplier decision into a legal risk decision.
What is Joint and Several Liability?
JSL makes agencies jointly responsible for unpaid PAYE. This happens when their umbrella company fails to pay HMRC. HMRC can recover the unpaid amount directly from the agency. It does not need to go after the umbrella first. The agency is liable the moment the umbrella defaults.
Before April 2026, the chain was simpler. The umbrella owed the tax. If they did not pay, HMRC chased the umbrella. Agencies faced reputational damage. But they had no direct financial exposure.
That changed on 6 April 2026. New legislation changed ITEPA 2003. It added Chapter 11. This brought joint and several liability into the umbrella supply chain. Agencies using non-compliant umbrellas now face the same financial exposure as the umbrella.
The word joint is the key part. Joint liability means HMRC does not need to try other options first. They can come straight to your agency.
What does HMRC actually recover under JSL?
HMRC can recover unpaid income tax from your agency. It can also recover employer NIC and employee NIC. It uses the same debt recovery powers it uses against employers. Interest and penalties can apply on top of the original tax amount.
The unpaid PAYE comes from the umbrella. The umbrella collected tax from contractors. It did not pass the money to HMRC. It kept the money. HMRC can now recover that amount from the agency. The agency chose that umbrella.
The amounts can be large. A mid-size agency with 100 contractors faces big exposure. The PAYE exposure can reach hundreds of thousands. This happens if their umbrella collapses with unpaid tax.
This is not theoretical. HMRC published guidance in early 2026. The guidance confirms these recovery powers.
Which agencies are affected?
Any agency that places contractors through an umbrella is affected. This includes temporary staffing agencies. It includes specialist contractor recruiters. It includes managed service providers. If your agency sits between the end client and the umbrella, you are in the JSL chain.
The rule does not look at size. A small agency with five contractors carries the same exposure. A large recruiter with thousands carries the same exposure. The only question is this. Did you use an umbrella? Did that umbrella pay HMRC?
Agencies that place PAYE workers directly are not in scope. This means no umbrella in between. But for any worker paid through an umbrella, the agency is now liable.
How does FCSA accreditation reduce JSL risk?
FCSA-accredited umbrellas pass independent audits. The audits check PAYE compliance standards. Accredited umbrellas must pay HMRC correctly. They must avoid tax avoidance schemes. They must keep transparent payroll practices. For agencies, using an FCSA-accredited umbrella is proof. It shows you made a responsible choice.
The FCSA audit checks payroll accuracy. It checks HMRC payment records. It checks contract terms. It checks how deductions are explained to contractors. Umbrellas that fail the audit lose accreditation.
That audit record matters for your agency. HMRC may investigate your supply chain under JSL rules. You can show that accreditation checks were part of your process. You acted responsibly. This is not a legal defence on its own. But it is evidence. It shows you did your due diligence.
Read the full detail on how to check umbrella compliance.
What is Professional Passport and why does it matter separately?
Professional Passport is a separate accreditation body. It is independent. Its audit covers PAYE operations. It covers worker rights. It covers contract terms. It covers payroll practices. It is not linked to FCSA. Passing the Professional Passport audit is a separate check.
The two bodies do not share audit results. An umbrella can pass FCSA but fail Professional Passport. The reverse can also happen. Holding both means the company passed two separate checks. Both checks are independent.
For agencies, dual accreditation is the strongest evidence. It shows supply chain due diligence. This is the best option in the UK umbrella market right now.
What does dual accreditation mean for your legal position?
An umbrella with both accreditations passed two independent audits. For your agency, this creates a documented trail. If HMRC questions your umbrella choice, you have evidence. The evidence comes from two separate bodies. Both bodies confirm the umbrella met standards. The standards were met at the time you used them.
Dual accreditation is the strongest position for your agency. This is true after JSL. Very few UK umbrellas hold both. That combination separates real compliance from tick-box selection.
DASA holds both FCSA and Professional Passport accreditation. See our FCSA and Professional Passport accreditation for full detail.
What practical steps should agencies take now?
Review your Preferred Supplier List. Replace any umbrella without current accreditation. Or place them on review. Keep written records of all checks. A date-stamped log is your evidence. Use it if HMRC queries your supply chain.
Here is a basic framework:
1. Check accreditation status for every umbrella on your PSL.
Do not rely on past checks. Accreditation can lapse. Check the FCSA and Professional Passport lists directly.
2. Ask for written confirmation of current PAYE compliance.
Request a sample RTI record. Request a sample payslip. Non-compliant umbrellas avoid these questions.
3. Watch for high take-home pay promises.
Any umbrella offering 80% or more take-home is signalling a non-PAYE setup. That is your liability. Not theirs.
4. Document everything.
Date every check. Keep email records of accreditation. Store sample payslips. This log is your due diligence evidence under JSL.
For a full process, read how agencies choose an umbrella company.
A full JSL due diligence checklist is available here.
What happens if your umbrella is non-compliant and HMRC investigates?
HMRC can investigate the umbrella’s PAYE records. If they find unpaid tax, they issue a joint liability notice. The notice goes to the agency. The agency has a short window to respond. HMRC can then pursue the debt. They use standard enforcement powers. This includes charging orders against business assets.
Ignorance is not a defence under JSL. HMRC does not need to prove the agency knew. It only needs to show two things. The agency used the umbrella. The umbrella defaulted on PAYE.
Act before any investigation opens. Change your PSL now. Document your due diligence now. This puts you in the best position.
Speak to an umbrella company for recruitment agencies with dual accreditation.
Frequently Asked Questions
What is Joint and Several Liability for recruitment agencies?
From 6 April 2026, JSL rules make agencies jointly liable. This applies if their umbrella fails to pay HMRC. HMRC can recover the unpaid tax directly from the agency. It does not need to pursue the umbrella first.
When did JSL rules for agencies come into force?
JSL rules came into force on 6 April 2026. The legislation changed ITEPA 2003. It added Chapter 11.
What can HMRC recover from an agency under JSL?
HMRC can recover unpaid income tax from the agency. It can recover employer NIC and employee NIC. It can also recover interest and penalties.
How does FCSA accreditation protect agencies from JSL liability?
FCSA accreditation means an umbrella passed an independent audit. The audit checks PAYE compliance. Using an FCSA-accredited umbrella gives agencies evidence. It shows responsible supplier selection.
Why does dual FCSA and Professional Passport accreditation matter?
Dual accreditation means two independent bodies checked the umbrella. Both confirmed it meets compliance standards. This is the strongest due diligence position for agencies under JSL.
What should recruitment agencies do to protect themselves from JSL?
Review your PSL for accreditation. Document all checks. Request sample payslips and RTI records. Replace any umbrella offering 80% or more take-home pay.
