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From 6 April 2026, Joint and Several Liability means your recruitment agency is liable for every penny of unpaid PAYE if your umbrella company gets it wrong. There is no defence. No reasonable care exemption. No excuse.
The industry is telling you the answer is better due diligence and tighter Preferred Supplier Lists. We think there's a simpler answer: run off-payroll workers on your own PAYE and remove the umbrella from the chain altogether.
HMRC has been unambiguous: even if your agency pays the umbrella in full, even if you did thorough due diligence, even if the umbrella gave you written assurance — if they don't pay the tax, you pay the tax. When asked at a stakeholder webinar whether the agency is still liable even if it paid the umbrella correctly, HMRC gave a one-word answer: “Yes.”[1]
The dominant response to JSL in the recruitment industry is to invest in compliance monitoring — tools like SafeRec, tighter PSLs, accreditation checks. These are sensible steps. But they don't change the fundamental risk: you are still relying on a third party to pay HMRC correctly, and if they don't, the bill is yours.
Due diligence reduces the probability of a problem. It does not reduce the liability when a problem occurs. Under Chapter 11 ITEPA[2], there is no statutory defence for the agency. The question HMRC asks is simply: was the tax paid? If the answer is no, the debt notice arrives at your door.
HMRC analysis shows that at least 275,000 of the 700,000 umbrella workers were engaged by non-compliant companies, and that £500 million was lost to disguised remuneration tax avoidance in a single year — almost all of it facilitated by umbrella companies.[4] The scale of enforcement is going to be substantial.
There is also a reputational dimension that due diligence cannot address. If an umbrella in your supply chain is found to be non-compliant, headlines do not distinguish between “bad umbrella” and “agency that used them.” For agencies working in the public sector, regulated industries, or any environment where supply chain compliance is under scrutiny, the association alone can damage client relationships — regardless of whether you end up liable for the tax.
Your agency pays the umbrella. The umbrella runs PAYE. If the umbrella fails to remit tax to HMRC, your agency is jointly and severally liable for the full amount — tax, NICs, penalties, and interest. No defence available.
Your agency runs PAYE on off-payroll workers itself. Tax goes directly to HMRC under your own employer reference. There is no umbrella in the chain. Chapter 11 JSL does not apply. Your liability is the same as any PAYE employer — known, bounded, and under your control.
HMRC's own policy paper acknowledges this outcome[3]: “Some businesses may choose to administer their own payrolls rather than contracting with an umbrella company.” The legislation is explicitly designed with this possibility in mind.
Running PAYE for off-payroll workers isn't the same as running payroll for your own employees. Off-payroll workers inside IR35 have a specific tax treatment — they're taxed at source like employees, but they aren't your employees. They don't accrue holiday, sick pay, or pension entitlements through your agency. Most standard payroll software doesn't handle this distinction well, because it's designed for either permanent staff or agency temps — not for the off-payroll worker category that sits between the two.
Hubbado was built specifically for this gap. We already run off-payroll PAYE for agencies in our own group, and the platform is designed to let any recruitment agency do the same — with the right tax treatment, the right deductions, and the right RTI reporting — without turning workers into your employees, and without the overhead of managing holiday pay, auto-enrolment pensions, and statutory entitlements that would normally come with adding someone to your payroll.
Hubbado connects to your existing payroll software to handle off-payroll worker pay runs with the correct IR35 treatment.
Workers submit timesheets through Hubbado. We calculate the correct PAYE, NICs, and any relevant deductions — then feed the pay run into your payroll.
Tax is paid to HMRC under your own employer reference. No umbrella in the chain. No third-party risk. You control the process end to end.
Umbrella companies typically charge workers between £80 and £130 per month. That cost is deducted from the worker's pay before they see it. With Hubbado, the cost to your agency is less than what the umbrella charges — and you have the option to pass it to the worker transparently or absorb it as a cost of doing business. Either way, it eliminates your JSL exposure entirely.
JSL is not the end of the story. Umbrella company regulation through the Fair Work Agency is expected to follow in 2027, and the broader direction of travel from HMRC is clear: simplified supply chains, clearer accountability, fewer intermediaries. Each new rule increases the burden on the umbrella model rather than stabilising it.
Removing the umbrella now doesn't just solve the immediate JSL problem — it positions your agency on the right side of where regulation is heading. Fewer parties in the chain means simpler reconciliation between invoice, gross pay, and tax deductions, and a model that is straightforward to explain to boards, auditors, and clients.
Hubbado is designed to work alongside your existing payroll provider. We handle the off-payroll worker calculations and feed the results into your payroll system, so you don't need to replace anything you already use.
Workers move from being paid through the umbrella to being paid through your agency's PAYE. Their take-home pay stays the same or improves, because they're no longer paying the umbrella's margin. The transition is handled per worker and can be phased in alongside existing arrangements.
The JSL risk that this approach eliminates applies specifically to workers engaged through umbrella companies under the off-payroll working rules (IR35). If you also place outside-IR35 contractors who operate through their own limited companies, those arrangements are unaffected.
No. Off-payroll workers are taxed at source like employees, but they are not your employees. Hubbado handles the specific tax treatment for this category — including the correct NICs, deductions, and RTI submissions — without creating employment obligations such as holiday pay, sick pay, or auto-enrolment pensions.
That depends on the size of your off-payroll workforce and your existing payroll setup. Get in touch and we can give you a realistic timeline for your situation.
JSL takes effect on 6 April 2026. Get in touch and we'll tell you whether this approach fits your situation and what it would take to get set up.