Explanatory note

These Regulations are made in consequence of the insertion of Chapter 11 into the Income Tax (Earnings and Pensions) Act 2003 by section 24 of the Finance Act 2026 (c. 11).

These Regulations make recruitment agencies jointly and severally liable to pay any amount payable under sections 6, 10 and 10A of and paragraph 3 of Schedule 1 to the Social Security Contributions and Benefits Act 1992 and section 6, 10 and 10A of and paragraph 3 of Schedule 1 to the Social Security Contributions and Benefits (Northern Ireland) Act 1992, when they supply workers through umbrella companies. Where there is no agency involved in the supply of the worker, the joint and several liability will apply to the client to whom the services are provided.

Regulation 3 specifies the conditions under which joint and several liability arises. It makes certain relevant parties jointly and severally liable for paying any Class 1 National Insurance Contributions due on a qualifying umbrella company payment, and it defines the contractual arrangements within a labour supply chain that must be in place for this joint and several liability to arise. Regulation 3(4) provides HMRC with the power to determine whether the conditions under which this joint and several liability arises have been met.

Regulation 4 defines who is a relevant party for the purposes of regulation 3.

Regulation 5 explains the circumstances in which a person is regarded as a ‘purported umbrella company’. It also sets out when an individual is to be treated as employed by such a purported umbrella company, specifies which remuneration counts as earnings from that deemed employment, and sets out when joint and several liability, under regulation 3, applies in relation to the purported umbrella company. Regulation 5(12) provides HMRC with the power to determine whether a person is a purported umbrella company.

Regulations 6, 7, 8 and 9 amend legislation in consequence of regulations 3 to 5 in order to prevent a joint and severally liable person from avoiding liability where fraudulent documentation has been provided to that person and to ensure there is a liable entity in the United Kingdom.

A Tax Information and Impact Note covering this instrument has been published on the website at: https://www.gov.uk/government/publications/paye-changes-for-the-umbrella-company-market.