Joint and Several Liability: what Recruitment Agencies need to know

From April 2026, the UK government will introduce Joint and Several Liability (JSL) as part of new umbrella company legislation. This is a significant change in accountability for recruitment agencies and end clients who work with umbrella providers — and it could have major financial consequences if ignored.

 

What is Joint and Several Liability?

In simple terms, JSL means that if an umbrella company fails to meet its tax obligations, HMRC can hold others in the supply chain responsible, including recruitment agencies and, in some cases, end clients.

This is a strict liability regime:

• You cannot argue that you “didn’t know.”

• Agencies must actively prove that their supply chains are compliant.

• Failure to do so could leave agencies footing the bill for unpaid PAYE or National Insurance.

How will JSL work in practice?

Under the new rules:

• The umbrella company remains the legal employer and retains the Employer’s Reference Number (ERN).

• If HMRC uncovers a tax shortfall, whether from unpaid PAYE, National Insurance, or non-compliant schemes, they are no longer restricted to chasing the umbrella provider.

Instead, HMRC can pursue:

• The recruitment agency at the top of the supply chain.

• The end client, where no agency is involved.

In other words, if your payroll partner cuts corners, you could still be held liable — even if you had no knowledge of the issue. Contracts or “trust” won’t be enough. Agencies must now show active, ongoing due diligence across their supply chain.

What this means for Agencies

JSL introduces a new layer of risk for agencies:

• Financial exposure if a payroll provider fails to comply.

• Reputational damage if contractors or clients are affected.

• Operational burden of proving compliance on an ongoing basis.

Agencies will need to reassess their payroll partnerships, strengthen supply chain checks, and keep detailed records to satisfy HMRC.

How ACL Limits Agency Risk

At ACL, compliance and transparency are built into everything we do. We help agencies reduce their JSL exposure through:

• Independently verified payslips via VeriPAYE — ensuring every tax and NI deduction is correct and providing a robust audit trail.

• Full supply chain visibility — so agencies can clearly evidence compliance at every stage.

• Robust onboarding checks — protecting agencies from non-compliant schemes before they become a risk.

• Clear contractual protections — safeguarding agencies against liability where possible.

This proactive approach means agencies can show HMRC that they’ve taken all reasonable steps to prevent risk, significantly reducing the chance of being hit with unexpected liabilities.

Staying ahead of change

JSL is coming — and it changes the rules of the game for recruitment agencies.

Those who don’t adapt face increased risk, but those who work with trusted, transparent payroll partners like ACL will be in the strongest position to protect their business, their contractors, and their reputation.

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Want to discuss how ACL can help your agency prepare for JSL? Get in touch today.