From IR35 to GDPR, recruiters are no strangers to strict legal regulations. However, from 6th April 2026, staffing consultancies will face even greater compliance risk. New Joint and Several Liability legislation will give the UK Government the power to pursue a recruitment agency for any taxes relating to its contractors that its umbrella company partner fails to pay.
HMRC will be able to pursue the agency (and in some cases the end client) for the entire unpaid amount, plus interest and potential penalties, regardless of fault or due diligence.
As of late 2024, HMRC’s list of tax avoidance schemes featured nearly 100 non-compliant umbrella companies, almost doubling from the previous year, potentially putting 1,000s of agencies at risk when the JSL rules come into play.
HMRC is becoming ever more stringent in its approach to non-compliance and supply chain scrutiny is set to ramp up in the year ahead. With untrustworthy umbrellas so widespread, how can you find a fully compliant partner to help you weather the Joint & Several Liability changes this April?
5 Ways To Check Which Umbrella Companies Can Support You With JSL Changes
When looking for a new umbrella company, or measuring providers in an existing supply chain for compliant practices, recruiters can assess for the following:
- The Basics – Legitimate Company Status & Financial Solvency
First things first: untrustworthy companies can often be spotted with an initial browse through publicly available information. Check Companies House for any company’s official UK registration, trading history and directors.
Only a business with strong foundations will be able to protect your agency from any debt post-JSL changes. A healthy balance sheet built over several years is a reliable indicator that an umbrella company has historically paid large volumes of contractors and complex taxes on time and in full, and that they’re likely to do so in future.
These small checks might sound obvious, but are vital in revealing any discrepancies at the first opportunity. Irregularities or vague information can form the basis of questions used to assess individual or multiple umbrellas. Any pattern of dissolve/restart behaviour will also quickly identify “phoenix” companies (businesses that have been liquidated and effectively started again with the same directors and activities for the purposes of avoiding debt/tax) which are rife in the umbrella industry.
- Establish Industry Credentials & Official Recognition
Credible umbrella companies don’t have to shout about how good they are; their reputation already precedes them. Officially recorded recognition and public promotion from trustworthy industry bodies is better testament to a provider’s compliance than anything they could claim themselves.
Accreditation and certification from the following organisations is evidence that a business has had to pass the highest standards of compliance:
- SafeRec – The UK’s original and market-leading real-time compliance checking service for umbrella companies, SafeRec combines independent legal expertise with real-time auditing. Every certified provider must undergo a comprehensive legal review conducted by a regulated UK law firm specialising in tax and employment, which scrutinises contracts, policies and operations against current legislation and industry best practices. In addition, every contractor payment is checked and verified to ensure the correct tax and NI has been calculated and paid to HMRC, with real time reporting available to agencies through the Saferec portal.
- FCSA – As the only compliance standard recognised and endorsed by all of the UK’s leading recruitment bodies, FCSA is the gold standard for the UK’s umbrella, contractor accounting and CIS service sectors. FCSA accreditation involves rigorous, independent annual audits from top tax and legal specialists, guaranteeing high ethical standards, tax compliance and financial stability. Generate recently passed our latest annual compliance review, further strengthening our 12-year reputation supporting 10,000s of contractors, recruiters and end clients.
When you’ve checked that your current or potential umbrella provider has been certified by a reputable industry body, double check that the certification is in full and in date. Request a copy of current certificates and the latest audit report, including who carried it out, the scope and the date.
- Ask Your Provider To Demonstrate Real-Time Due Diligence
Whilst rigorous assessment every year is essential, recruitment agencies are moving beyond just annual one-off compliance checks and complementing their large-scale reviews with continuous real-time monitoring. Umbrella companies that partner with industry bodies like SafeRec and VeriPAYE guarantee ongoing, independent verification of payslips, tax deductions and payments to HMRC.
Recruiters are given access to reporting data and verification details so they can confirm that every payslip has independently audited, that tax and NI has been correctly calculated for every assignment, and that the PAYE and NICs have been paid on time and in full to HMRC.
Because we’re SafeRec-certified, Generate’s agencies get total visibility of how we operate, how we pay and how we protect everyone involved.
- Insider Perspective: Understand Their Reputation Amongst Employer & Contractor Networks
Like staffing agencies, many end clients will be fully aware of JSL and will increasingly ask how you are managing these risks. Contractors will also have worked under a variety of umbrellas and some will be well versed in fraud and non-compliance issues from the other end of the scale, providing a fresh perspective on the trustworthiness of particular firms. Harness their knowledge and interest as another source of evidence for assessing your umbrella companies:
- Confirm that workers receive appropriate documentation and itemised payslips at the right stages (REC members can use their official document timeline to ensure workers are receiving what they need by when)
- Check that contractors receive clear communication, have access to support channels and are given straightforward, proactive explanations of all deductions
- Look at real feedback on trusted independent channels like Google and Trustpilot for consistent complaints about underpayments, unexplained deductions or pressure to join “alternative” payment arrangements.
A handful of dissatisfied customers/users are normal for any company in any industry, however a continuous pattern of underperformance and repeated claims of poor communication or incorrect payments indicate significant problems with an umbrella company.
- Conduct Practical Checks Through an Extensive Survey Of Your PSL
After performing background checks, retrieving publicly available information, seeking evidence from official bodies and speaking to contractor and employer networks, the final place to uncover compliance information is from the umbrella itself.
A full overhaul of your PSL is time and resource-consuming, but will cost considerably less than the hefty unpaid tax bills and reputational damage associated with non-compliant supply chains. Extensive surveys can be sent to every supplier on your PSL and ask for evidence of:
- Current accreditations of the above umbrella industry bodies and other relevant certifications eg those that are sector-specific
- Latest audit report and actions taken following any recommendations
- Sample contractor payslips
- Examples of worker contracts
- Employer’s liability insurance
- Real-time independent monitoring
- Summary of their HMRC interaction history, including any enquiries and settlements for errors or non-compliance.
REC and other industry bodies also offer their own due diligence checklists to assess your supply chain. Recruitment leaders can leverage these as standard practice or use them to develop their own, surveying every member of their PSL at the very least both during onboarding and annually, if not quarterly, to maintain strict compliance standards.
Keep a central file for every umbrella company that your agency works with. Include your due diligence checklist, Companies House printout, accreditation evidence, sample payslips/RTI checks, audit reports and any other evidence you’ve gathered from your audit. Record your responses to any red flags identified by your surveys and document the decisions taken by your agency and the outcome these delivered.
What If I Can’t Guarantee My Current Umbrella Will Be Compliant With JSL?
When you’ve surveyed and audited your PSL, pause trading with any supplier that you’re unsure about and limit your PSL to a small panel who have demonstrated compliance standards and whom you trust. Document why each supplier remains approved and a member of your PSL, referencing the new JSL rules from April 2026.
Check your own contracts with your PSL – do they include rights to audit, access to information, and clear responsibilities around PAYE, RTI and cooperation with HMRC or independent auditors? Update your contracts and discuss with your umbrellas if anything is unclear.
Most recruitment agencies will be using JSL as a good opportunity to review supply chains and conduct standard checks on umbrella providers. However, complex supply chain structures and the vast presence of non-compliance in the industry means that in many cases, due diligence will simply not be enough.
Put bluntly: merely checking certificates and asking an umbrella to sign and stamp a compliance questionnaire will not satisfy HMRC. Your agency can be sent a Regulation 80 determination if your umbrella defaults on PAYE, whether you can demonstrate due diligence and have followed careful vetting procedures or not. So make sure you are only using umbrellas that can demonstrate their compliance in real time. Staffing consultancies must now treat umbrella selection and monitoring as a core risk-management function, not the back-office courtesy to which compliance has often been relegated.
If you suspect serious non‑compliance, raise it with the accrediting body and/or use HMRC’s online reporting form, which can be completed anonymously.
If your agency has set up detailed frameworks and checks, and you still don’t feel you can count on your provider to protect you from liability, get in touch with the Generate team – we’re 100% compliance guaranteed.
How Can I Find a 100% Compliant Umbrella Provider?
As international payroll and contractor management experts, Generate fulfill all umbrella criteria across:
- Industry Recognition – Our FSCA and Saferec accreditations mean we’ve been independently assessed by impartial tax, accountancy and legal professional services firms against the sector’s highest standards and can offer our agencies total visibility and assurance of correct calculations of payroll, and correct payments of PAYE and NIC tax to HMRC.
- Healthy Balance Sheet – Our strong financial foundations mean we’ll protect your agency from any liabilities or reputational damage post-JSL changes. You can rely on us to pay every contractor and every HMRC payment on time every time.
- Reputation – We’ve got 12 years of experience with payroll solutions in over 100 countries worldwide. As the UK Education sector’s largest payroll partner, we know every finance and compliance challenge you’ll ever face, inside and out.
Speak to our finance and compliance specialists to find out how we can help your agency navigate the new JSL tax rules.
