What's Happening?
The joint and several liability (JSL) provisions within the forthcoming umbrella legislation, effective April 6, 2026, will alter the engagement of UK contingent labor. The new rules will place direct
tax liability on clients and recruitment agencies if an umbrella company fails to remit PAYE or national insurance contributions. HR leaders are urged to prepare for these changes to avoid disruption and redesign workforce models to mitigate tax risks. The legislation follows previous IR35 reforms, which led businesses to prefer umbrella arrangements as a safer alternative. However, the new JSL rules reverse this logic, increasing the tax liability burden on umbrellas.
Why It's Important?
The JSL legislation represents a significant shift in the risk landscape for businesses using umbrella companies. HR departments must anticipate these changes to avoid exposure to catastrophic tax risks. The legislation could lead to rapid bans on umbrellas, forced migration of workers to in-house or agency payrolls, or a reconsideration of IR35. These movements will challenge HR's ability to manage compliance while maintaining workforce continuity. The increased liability risk underscores the need for strategic planning and proactive measures by HR professionals.
What's Next?
HR leaders are advised to study the legislation, engage with their boards, and plan for operational impacts. As the April 2026 deadline approaches, businesses must develop contingency plans to address potential disruptions. Firms may reconsider their use of umbrella companies and IR35 arrangements, with some opting for strict due diligence regimes or direct HMRC payments. The evolving risk landscape requires HR to form strategies that ensure compliance and protect against tax liabilities.
