HMRC will be given new powers to curb abuse as the government plans to implement tough rules to tackle the wider supply chain and tackle significant levels of tax avoidance and fraud in the umbrella company market.

The legislation will shift the risk of unpaid taxes, penalties and interest from the umbrella company to the recruitment agency engaging the umbrella.

From April 2026, recruitment agencies will be responsible for ensuring that the correct income tax and National Insurance contributions (NICs) are paid through PAYE to HMRC, on payments made to workers that are supplied via umbrella companies.