Joint & Several Liability – What Do You Need To Know?

• Relevant Parties: Liability primarily attaches to the “top” recruitment agency (the
  • one contracting with the end client).
  • End-Client Liability: Hirers become liable if they contract directly with the umbrella company, if the agency is based offshore, or if the agency is “connected” to the umbrella company.
  • Strict Liability: There is no statutory defence or “reasonable care” excuse; agencies and clients remain liable even if they performed thorough due diligence.
  • Purported Umbrellas: The rules include a “catch-all” provision for purported umbrella companies to prevent avoidance through creative legal labels. 
  Impact on Stakeholders
  • • in real-time, as traditional accreditations will no longer protect them from inherited debts.
    • For Contractors: The legislation is protective; it shifts the risk of unexpected tax bills (such as those seen in previous “loan charge” scandals) away from the worker and onto the companies arranging the work.
    • For End Clients: Businesses may see agencies “lock down” their Preferred Supplier Lists (PSLs) to a very small number of highly vetted umbrella providers to mitigate risk. For Recruitment Agencies: Agencies must now actively verify that taxes are paid
    Timeline
    • April 2026: JSL for PAYE and NICs takes effect for all payments made on or after this date.
    • 2027 (Expected): Further umbrella sector regulation addressing employment rights and operational standards

• Financial & Entity Verification
  • Companies House: Confirm UK registration, identify Persons of Significant Control
  • • (PSC), and check for a history of frequent name changes or “phoenixing”.
    • Tax Residency: Verify the company is a UK-resident for tax purposes to avoid automatic liability.
  • Operational Compliance
    • HMRC RTI Proof: Mandate Real-Time Information (RTI) reporting data or HMRC payment receipts for every payroll cycle.
    • Payslip Forensic Audits: Conduct regular sample checks (or use automated tools like SafeRec) to ensure the assignment rate matches the gross pay and that no “loans” or “advances” are used.
    • Accreditation Check: Verify status with FCSA or Professional Passport directly on the accreditor’s website.
  • Ongoing Monitoring
    • • Quarterly Reviews: Schedule formal audits every 3–6 months rather than relying on one-off onboarding.
      • Blacklist Screening: Check HMRC’s list of named tax avoidance schemes monthly. 
        Contractual Indemnity Clause Template
        Disclaimer: This is a general draft. Always consult with legal counsel to ensure clauses are enforceable under the specific terms of your engagement.

        “1. Tax Indemnity and Compliance”
        1.1 The Umbrella Company shall be solely responsible for the deduction and payment of all PAYE income tax and Class 1 National Insurance Contributions (NICs) in respect of the Workers.
        1.2 The Umbrella Company hereby indemnifies and holds harmless the Agency against any and all liabilities, costs, expenses, damages, and losses (including but not limited to any direct, indirect, or consequential losses, loss of profit, and all interest, penalties, and legal costs) suffered or incurred by the Agency arising out of or in connection with any failure by the Umbrella Company to comply with its obligations under the PAYE Regulations or Social Security Contributions and Benefits Act 1992.
        1.3 The Umbrella Company shall, within 5 business days of a request, provide verifiable evidence (including RTI submissions and HMRC bank transfer confirmations) that all relevant taxes have been remitted in full.

        1.4 Failure to provide such evidence shall constitute a material breach, entitling the Agency to terminate this agreement immediately and/or withhold further payments until compliance is proven. 
        Note: Contractual indemnities are only as valuable as the assets behind them. If an umbrella company collapses, the indemnity may be worthless, which is why financial stability checks are critical. 

• “Take-Home Pay” Promises: Any marketing that guarantees a specific percentage of take-home pay (e.g., “Keep 80-90% of your earnings”) is a major red flag. Standard UK tax and NICs usually result in much lower retention.
• Non-Taxable Payments: Schemes that use terms like “loans,” “credits,” “advances,” “grants,” or “shares” to describe part of a worker’s income. These are almost always used to bypass PAYE according to HMRC guidance.
• Offshore Elements: Marketing that mentions an “offshore trust” or a company registered outside the UK (e.g., Isle of Man, Channel Islands). Under the 2026 rules, using an offshore entity automatically transfers liability to the UK agency or client.
• Split Payments: The worker receives two separate payments—one small amount via a payslip with tax deducted, and a larger “bonus” or “payment” from a different entity with no tax.
• HMRC “Approved” Claims: HMRC never approves or “signs off” on an umbrella company’s tax model. Any marketing claiming to be “HMRC Approved” is intentionally misleading.
• 🛡️ Immediate Steps to Take
  1. Request a Sample Payslip: Run the figures through the HMRC Tax Calculator. If the take-home pay on the marketing material is significantly higher than the calculator’s result, the scheme is non-compliant.
  2. Audit the “Identity”: Ensure the company name on the Key Information Document (KID) matches the name on the contract and the name paying the worker.
  3. Check the “Spotlight” List: Regularly review HMRC’s Tax Avoidance Spotlights to see if a provider’s specific model has been flagged.

The Staffing Network have taken stringent steps to ensure full compliance with the JSL legislation.

All of our workers are paid using our in house PAYE payroll. This eliminates all risk.

If you require more information please get in touch either by email info@staff-network.co.uk or call us on 0330 6062636