Under legislation effective 6 April, a brand new ‘joint and several liability’ rule now catches recruitment agencies if they use umbrellas failing to pay correct PAYE taxes.

This is a tightening of the rules with new legislation in Chapter 11, Part 2 Income Tax (Earnings and Pensions) Act 2003 (ITEPA) to tackle non-compliance in labour supply chains that include an umbrella company, or any third person sees introduction of a new ‘joint and several liability’ rule.

This measure is designed to crack down on situations where umbrella companies contract out workers to other organisations, resulting in a blurring of the responsibilities surrounding off-payroll labour/IR35 rules.