From 6th April, agencies using umbrella companies become strictly liable to HMRC for any unpaid tax on workers' pay. This is a significant change — and it matters for clients too.
What's changing?
Previously, if an umbrella company in the supply chain failed to pay the correct tax, HMRC would pursue the umbrella company. From April, the recruitment agency becomes liable — even if they were unaware of the issue.
According to the REC, "claiming that you were not aware of non-compliance is not a defence.
Why it matters to you
If your agency uses umbrella companies and hasn't done proper checks, you could face:
- Workforce disruption - If HMRC investigates the umbrella company or agency, workers in your business could be affected
- VAT complications - HMRC can deny agencies the right to recover VAT input tax if they're connected to VAT fraud, which could impact costs passed to you
- Supply chain uncertainty - Your agency could be named on HMRC's public list of those involved with tax avoidance schemes, which creates reputational risk in your supply chain.
- Compliance questions - If issues arise, you'll need to show you've taken reasonable steps to avoid non-compliant suppliers.
The REC is clear: agencies need to carry out "regular, reasonable and proportionate" due diligence. If your agency uses umbrella companies, they should be able to show you what checks they're doing.
Questions worth asking your agency:
- Do you use umbrella companies for any of our placements?
- If so, what due diligence do you carry out?
- Are you confident in your compliance processes ahead of April?
How we work
We've always operated differently. Every worker we place is employed directly by Prime Appointments or placed on your payroll. No third parties. No umbrella companies. Just clear, direct employment.
It means fewer moving parts, full visibility, and no hidden compliance risks for you.
If you're unsure how your current agency operates, it's worth a conversation.
We're happy to talk through what this change means in practice — or just give you a second opinion on your current setup.
Sources:
All information from REC Guidance: "Responsibilities for employment businesses working with umbrella companies"
