From 6 April 2026, recruitment agencies are jointly liable for unpaid PAYE. If your umbrella company does not pay HMRC, your agency can end up responsible for that tax bill. JSL turns umbrella company choice from a supplier call into a legal risk call.
What is Joint and Several Liability?
JSL makes recruitment agencies jointly responsible for unpaid PAYE tax when their umbrella company fails to pay HMRC. HMRC can recover the unpaid amount directly from the agency. It does not need to pursue 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 it did not pay, HMRC chased the umbrella. Agencies faced reputational harm, but not direct financial exposure.
That changed from 6 April 2026. Legislation amending ITEPA 2003, with Chapter 11, brought joint and several liability into the umbrella supply chain. Agencies using non-compliant umbrellas now face the same financial exposure as the umbrella itself.
The word “joint” is the important part. Joint liability means HMRC does not need to use every other option before it comes to you. It can come straight to your agency.
What does HMRC actually recover under JSL?
HMRC can recover unpaid income tax, employer NIC, and employee NIC from your agency. It uses the same debt recovery powers it uses against employers directly. Interest and penalties can apply on top of the original tax amount.
The unpaid PAYE comes from the umbrella not passing on what it collected. Contractors had tax deducted from their pay. The umbrella kept it. HMRC now has legal authority to recover that amount from the agency that chose to use that umbrella.
The amounts can be large. A mid-size agency placing 100 contractors at average day rates faces potential PAYE exposure in the hundreds of thousands of pounds if their umbrella collapses with unpaid tax.
This is not theoretical. HMRC published guidance confirming these recovery powers in early 2026.
Which agencies are affected?
Any recruitment agency placing contractors through an umbrella company is affected. This includes temporary staffing agencies, specialist contractor recruiters, and managed service providers. If your agency sits between the end-client and the umbrella, you are within the JSL chain.
The rule does not distinguish by size. A small agency with five contractors on umbrella PAYE carries the same legal exposure as a large recruiter with thousands. The only questions are whether you used an umbrella and whether that umbrella paid HMRC.
Agencies that only place PAYE workers directly, without an intermediary umbrella, are not in scope. But for any worker paid through an umbrella, the agency is now a liable party.
How does FCSA accreditation reduce JSL risk?
FCSA-accredited umbrella companies are independently audited against strict PAYE compliance standards. Accredited umbrellas must pay HMRC correctly, avoid tax avoidance schemes, and keep payroll practices clear. For agencies, using an FCSA-accredited umbrella is documented proof of responsible selection.
The FCSA audit covers payroll accuracy, HMRC payment records, contract terms, and how deductions are explained to contractors. Umbrellas that fail the audit lose accreditation.
For your agency, that audit record matters. If HMRC investigates your supply chain under JSL rules, you can show that accreditation checks were part of your selection process. You acted responsibly. That is not a legal defence on its own, but it is evidence of documented due diligence.
Read the full detail on what makes an umbrella company compliant to understand exactly what FCSA and Professional Passport check.
What is Professional Passport and why does it matter separately?
Professional Passport is a separate independent accreditation body. Its audit covers PAYE operations, worker rights, contract terms, and payroll practices. It is not affiliated with FCSA. Passing the Professional Passport audit is a separate compliance check.
The two bodies do not share audit results. An umbrella can pass FCSA but fail Professional Passport, or the other way around. Holding both means the same company passed two separate, independent compliance checks.
For agencies, dual accreditation from both bodies is the strongest evidence of supply chain due diligence currently available in the UK umbrella market.
What does dual accreditation mean for your legal position?
An umbrella holding FCSA and Professional Passport accreditation has passed two independent audits. For your agency, this creates a documented compliance trail. If HMRC questions your umbrella choice, you have third-party evidence from two separate bodies that the umbrella met compliance standards at the time you used them.
A dual-accredited umbrella company is the strongest due diligence position available to your agency post-JSL. Very few UK umbrellas hold both accreditations. That combination is what separates credible compliance from surface-level tick-box selection.
DASA holds both FCSA and Professional Passport accreditation. See our FCSA and Professional Passport accreditation for full detail on what each body audited.
What practical steps should agencies take now?
Review your Preferred Supplier List. Any umbrella without current FCSA or Professional Passport accreditation should be replaced or placed on review. Keep written records of all accreditation checks. A date-stamped compliance log is your evidence if HMRC ever queries your supply chain.
Here is a basic framework to follow:
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 membership lists directly.
2. Ask for written confirmation of current PAYE compliance.
Request a sample RTI submission record and payslip structure. Non-compliant umbrellas avoid these questions.
3. Watch for high take-home pay promises.
Any umbrella offering contractors 80% or more take-home is signalling a non-PAYE arrangement. That is your liability, not theirs.
4. Document everything.
Date every check. Keep email records of accreditation confirmation. Store sample payslips. This log is your due diligence evidence under JSL.
For a step-by-step process, read how agencies choose an umbrella company.
What happens if your umbrella is non-compliant and HMRC investigates?
HMRC can open an investigation into the umbrella’s PAYE records. If unpaid tax is found, HMRC issues a joint liability notice to the agency. The agency has a limited window to respond. HMRC can then pursue the debt using standard enforcement powers, including charging orders against business assets.
Ignorance is not a defence under JSL. The legislation does not require HMRC to prove the agency knew the umbrella was non-compliant. It only requires that the agency used the umbrella and that the umbrella defaulted on PAYE.
The time to act is before any investigation opens. Changing your PSL and documenting your due diligence now puts you in the best position.
Speak to an umbrella company for recruitment agencies that already holds dual FCSA and Professional Passport accreditation.
FAQ
What is Joint and Several Liability for recruitment agencies?
From 6 April 2026, JSL rules make recruitment agencies jointly liable for unpaid PAYE if their umbrella company fails to pay HMRC. HMRC can recover the unpaid tax directly from the agency without pursuing the umbrella first.
When did JSL rules for agencies come into force?
JSL rules for recruitment agencies came into force on 6 April 2026 under legislation amending ITEPA 2003, Chapter 11, in force from 6 April 2026.
What can HMRC recover from an agency under JSL?
HMRC can recover unpaid income tax, employer NIC, and employee NIC, plus interest and penalties, directly from the recruitment agency.
How does FCSA accreditation protect agencies from JSL liability?
FCSA accreditation means an umbrella has been independently audited for PAYE compliance. Using an FCSA-accredited umbrella gives agencies documented evidence of responsible supplier selection.
Why does dual FCSA and Professional Passport accreditation matter?
Dual accreditation means two separate independent bodies have both confirmed the umbrella meets compliance standards. It is the strongest due diligence position available to agencies under JSL rules.
What should recruitment agencies do to protect themselves from JSL?
Review your PSL for FCSA and Professional Passport accreditation, document all checks, request sample payslips and RTI records, and replace any umbrella offering 80%+ take-home pay.
