Employment, contingent workforce and immigration | UK Regulatory Outlook June 2025

Concerns continue as to how UK umbrella tax legislation will work 

New "umbrella" legislation is likely to be published in July and come into force in April 2026. It has been reported in June 2025 that HMRC wants it to involve no fault joint and several PAYE and NICs liability for any organisation that directly engages workers from an Employer-of-Record (EoR) or umbrella company – there will be no statutory defence relating to things like only using accredited umbrella companies or EoRs or which have passed compliance-audits. 

Where the organisation engages umbrella workers via staffing company intermediaries then the joint and several liability will probably not pass up to the end client under this legislation, although HMRC are generally stepping up enquiries about misuse of "dodgy" umbrella arrangements and can use regimes like the Criminal Finances Act 2017 and the Managed Service Company tax regime (Chapter 9 of Part 2 of ITEPA) and the new IR35 regime (Chapter 10 of that Part of ITEPA)  against end clients in certain umbrella-related situations. 

Organisations are expected to review their use of umbrella companies and EoRs and step up the spot checks they do to include more rigorous checks  that correct tax and NICs have been accounted for to HMRC. That process will not work as a "defence" to an assessment under the new legislation but should practically reduce the risk of liabilities. That process will, however, work as a "reasonable steps" defence under the criminal CFA regime (under which the courts can otherwise impose unlimited fines). Read more.