Don’t get caught out by umbrella company changes, Azets warns

Yorkshire business and advisory group Azets is urging businesses to prepare for changes in their legal responsibilities around employment tax following the government’s increased regulation of umbrella companies.

From 6 April 2026, the responsibility for accounting for National Insurance contributions (NIC) and pay as you earn (PAYE) will be moved from the umbrella company to the recruitment agency, or to the end client if a recruitment agency is not involved.

As a result, recruitment agencies and end clients will be contacted by HMRC if an umbrella company fails to pay NIC and/or PAYE to HMRC.

Richard Whitelock, tax partner at Azets in Yorkshire, said: “For some firms, umbrella companies are an established means of managing payroll for contractors, but they can also be used as a method of tax avoidance.

“The Government’s new approach will reduce the risk of this happening, but it will also put businesses on the hook for these payments if the company they use doesn’t pay HMRC what its owed – even if this is a legitimate mistake.”

To minimise the risk of being caught out by the changes, Azets advises Yorkshire businesses to:

• Review their policies and procedures for ‘off-payroll’ workers to ensure that, in addition to addressing tax status and IR35, due diligence is undertaken on their supply chain.
• Obtain documentation from the supply chain to show there is tax compliance as part of this due diligence process.
• Ensure due diligence is carried out on any new umbrella providers.
• Regularly audit the supply chain to identify when any new issues arise.

Richard added: “April 2026 may feel like a long time away, but I’d urge businesses to start preparing for these changes now and minimise the risk of being investigated by HMRC.”

Azets has three offices in Yorkshire, in Leeds, Bradford and York, where it employs 335 people.