As highlighted in our previous ‘conclusion of the umbrella consultation’ article, as of April 2026 the responsibility for PAYE and NI liability is moving to the agency closest to the client in the supply chain. This means agencies will be responsible if the umbrella company operating their payroll on their behalf fails to pay the necessary amounts of PAYE and NICs to HMRC This is all part of the government’s larger plan to clamp down on any non-compliance which harms workers. In this article we highlight some of the ways agencies may want to mitigate the risk of working with non-compliant umbrella companies.
Are they on HMRCs Name and Shame list?
HMRC list the names of the companies they believe to be tax avoidance schemes, as well as those affiliated with them through enabling or supplying. HMRC are taking a stand against such companies and as a recruitment business it is absolutely essentially to steer clear of such companies.
The government website is updated regularly so, consistent checks are necessary if you want to ensure that you or your contractors won’t experience any unexpected complications. You can find the list here: https://www.gov.uk/government/publications/named-tax-avoidance-schemes-promoters-enablers-and-suppliers/current-list-of-named-tax-avoidance-schemes-promoters-enablers-and-suppliers#v-to-x
Don’t put off until tomorrow, what you can start today
April 2026 will be here before you know it, so it’s best to get everything in order sooner rather than later. If you’d like to know what next steps you should take, we have already provided some tips which you can find in our guide here: https://focusedumbrella.co.uk/conclusion-of-the-umbrella-consultation/
Some of these tips include:
- Checking your supply chain
- Reviewing and consolidating your Preferred Suppliers List (PSL).
- Carrying out ongoing due diligence.
- Considering contractual indemnities and financial strength.
What does a red or green flag look like?
It’s not always easy to spot a good from a bad umbrella but here are some things to keep an eye out for.
Green flags:
Transparent payslips: A compliant umbrella company will be clear about their margins and provide a thorough payslip reconciliation alongside your contractors payslips including all employer deductions.
Employment contract: Contractors will be supplied with an employment contract which won’t have any minimum engagement periods or contain any hidden fees for joining or leaving.
Trusted accreditations: If an umbrella company is commented to high standards and have nothing to hide, they will be happy to be audited by trusted independent body such as the FCSA.
Right to work: A trusted umbrella companies will only employ your contractor after they have provided evidence of their right to work in the UK, ensuring everything is compliant.
Pension and Insurance: An umbrella company must operate a workplace pension scheme offering auto-enrolment and professional indemnity insurance, as well as employer and public liability insurance.
24/7 portal: A good umbrella company will allow your contractors access to an online portal for viewing payslips and submitting timesheets.
Red flags:
Loans or offshore arrangements: Some of the most risky umbrella companies may involve offshore arrangements or loans, they can get you in to the most trouble with HMRC as they are often linked to tax avoidance schemes
Hidden margins: If margins look low it may be too good to be true, low margins often come with hidden costs contractors aren’t expecting.
Illegal deductions: deductions from a contractor’s payment to cover statutory entitlements is illegal.
No accreditations: A non-compliant umbrella company will avoids external scrutiny and may claim to be “HMRC Approved” but don’t fall for this claim as HMRC does not provide any such approval.
Hidden fees: Extra fees incurred for same-day payments, providing references or issuing P45s at the end of contractors are sneaky and can sometimes catch agencies and contractors out.
Tax relief promises: An umbrella company that promises tax relief on travel-to-work expenses is often a red flag as the reliefs are likely ineligible, this is due to most umbrella employees being under supervision, direction, control.
It’s not always easy spot a non-compliant provider but looking out for the above red flags and keeping an eye on the government list is a good place to start. For any further help or support your agency may need with this call us on 0161 923 0210 or email client.support@focusedgroup.co.uk.
Related article: Conclusion of the umbrella consultation
The new measures were proposed after a comprehensive consultation involving both the previous government and stakeholders in the labour supply industry. This collaboration was key to HMRC acknowledging that compliant umbrella companies play a positive role in the contractor industry.