All labour users will soon be at risk!
In April 2026, new legislation is scheduled to regulate umbrella companies. The main thrust is straightforward. Users of agency labour will be liable to HMRC for unpaid tax if they use an agency which puts its workers through an umbrella company, if the umbrella and the agency fail to pay tax. If an umbrella liquidates (a very regular occurrence), then the liability passes to the agency; if the agency does not pay, the labour user will be chased by HMRC and will assume the liability for all unpaid tax. As a recent analysis stressed, "the agency or end client are on the hook for the whole amount and not a portion of the debt".Many believe that umbrellas will simply disappear as the risks in using them for agencies and end users will not be sustainable. The unfair price advantage that agencies that use umbrellas have historically been able to offer should become a thing of the past. Why would a labour user take any risk that they may face a huge HMRC demand out of the blue?
Many agencies do not mention to clients that they use umbrella companies. It is, therefore, imperative that all labour users make absolutely sure that they cannot be caught by the new legislation and are not inadvertently exposing their company to unqualified risk. Regular audits of their suppliers, or cast iron assurances will need to be sought. Ignorance of your labour supplier's arrangements will not be a defence; "We didn't know they used umbrellas" will be no protection.
Extraman has never used, and never will use, umbrella companies. All our staff are paid in-house under PAYE. All clients are welcome to audit our payroll. The scheduled changes will not affect us, or our customers, at all.