At the report stage of the Finance Bill 202526, the government introduced amendments relating to umbrella companies, focusing on improving compliance in labour supply chains and strengthening HMRC's ability to enforce PAYE obligations. The changes appear in Amendment 14 to Clause 24 of the bill and are explained in the accompanying explanatory notes published by HM Revenue & Customs.
Umbrella companies are commonly used in the UK labour market, particularly for temporary or contract workers supplied through recruitment agencies. In this arrangement, the umbrella company formally employs the worker and operates PAYE on their income. However, the government has identified widespread non-compliance in parts of the umbrella company market, including cases where the correct tax is not paid.
The report stage amendment mainly relates to the operation of joint and several liability rules within these labour supply chains. Under the wider umbrella company reforms, when PAYE tax is not properly accounted for, liability for the unpaid tax can extend beyond the umbrella company itself to other parties involved in the chain, such as recruitment agencies or end clients.
The amendment clarifies that HMRC may disclose relevant information to parties who are jointly and severally liable for PAYE debts under the umbrella company rules. This information-sharing power allows HMRC to inform those parties about tax debts or compliance issues connected with umbrella companies in the supply chain. The intention is to help those potentially liable understand the risk and take action where necessary.
Overall, the umbrella company amendment at report stage is designed to support the government's broader effort to tackle non-compliance in the sector. By allowing greater transparency and communication between HMRC and liable parties, the measure aims to ensure PAYE is correctly operated and to reduce the risk of tax losses within labour supply arrangements.
Read more here: https://www.gov.uk/government/publications/finance-bill-2025-26-report-stage
