Umbrella reform is coming – now is the time to review your payroll partners

This is a guest blog by REC Business partner, Brookson

The Government’s long-anticipated umbrella company reforms are on the horizon, with draft legislation expected in July and changes proposed to take effect from April 2026. While recent updates from HMRC suggest the sector may avoid the disruption of radical operational changes, the spotlight on compliance has never been brighter. 

For recruiters, now is the time to act. Ensuring your supply chain includes long-established, compliant umbrella partners isn’t just about due diligence, it’s about protecting your agency, your clients, and your contractors from reputational and financial risk.

What’s changing? 

HMRC have confirmed they are recommending a “joint and several liability” model, meaning umbrellas will continue to receive gross funds from the agency and process payroll under their own PAYE reference. This is a shift away from earlier proposals which would have made agencies responsible for deducting PAYE prior to making payment to umbrella companies, a move that would have introduced significant complexity for the supply chain.  

Assuming ministers approve HMRC’s recommendation, the current operational model remains intact. But that doesn’t mean the market is staying the same. 

The new legislation is expected to introduce stricter obligations around tax compliance, enforcement, and supply chain accountability. In practice, recruiters will need to take steps to ensure their umbrella partners are compliant, or risk facing a tax bill. 

Why this matters to recruiters 

The days of turning a blind eye to non-compliant umbrellas or selecting an umbrella company purely on commercials are over. With recruiters set to become jointly liable for their umbrella companies tax bills, the risks of working with the wrong provider have never been higher. 

That’s why recruiters need to ask themselves: 

• Is your current umbrella partner fully transparent about tax and payroll processes? 

• Are they independently checked, accredited, and well-established in the market? 

• Can you satisfy yourself that they are not cutting any corners based on the commercials that they offer, including their take-home pay illustrations for employees? 

Brookson - A proven partner in a changing market 

Brookson has been supporting recruiters and contractors for over 30 years. We’ve weathered every major legislative change and have always been at the forefront of compliance. 

Here’s what partnering with Brookson offers: 

• Fully compliant payroll services - all employees employed by the same entity and payrolled under its PAYE reference number. 

• FCSA-accredited - we are founder members of the FCSA and have passed our compliance reviews every year since its inception in 2008, giving agencies assurance of best practice. 

• Dedicated support for agencies and contractors with clear, proactive advice as legislation evolves. 

We’ve consistently engaged with HMRC and industry stakeholders to shape policy and represent the needs of ethical recruiters. That dialogue continues as we prepare for the next phase of reform. 

What should recruiters do now? 

• Review your PSL - make sure your umbrella partners are credible, accredited, and proven. 

• Get ahead of compliance - don’t wait until April 2026 to make changes.  As the days and weeks go by, more and more assignments will span across the April 2026 implementation date – avoid having to migrate workers mid assignment by locking down your preferred supplier list now. 

• Speak to your clients - are they aware of the risk you will be sheltering them from (if there is no agency the client will be at risk).  This enhances your commercial proposition to them. 

• Don’t just rely on contracts or insurance policies to cover this risk for you - you won’t know how effective they are until you need to call upon them, by which time it is too late to effectively manage this risk. 

• Talk to Brookson - we are a professional services business run by Chartered Accountants, Chartered Tax Advisors and Solicitors and we’re here to support you through the changes ahead. 

Let’s get it right, together. 

Now more than ever, recruiters have a responsibility to work with trusted umbrella providers. Brookson is ready, and we’re here to help you be ready too. 

Umbrella Reform is Coming – Here’s Why Now is the Time to Review Your Payroll Partners 

The Government’s long-anticipated umbrella company reforms are on the horizon, with draft legislation expected in July and changes proposed to take effect from April 2026. While recent updates from HMRC suggest the sector may avoid the disruption of radical operational changes, the spotlight on compliance has never been brighter. 

For recruiters, now is the time to act. Ensuring your supply chain includes long-established, compliant umbrella partners isn’t just about due diligence, it’s about protecting your agency, your clients, and your contractors from reputational and financial risk. 

What’s changing? 

HMRC have confirmed they are recommending a “joint and several liability” model, meaning umbrellas will continue to receive gross funds from the agency and process payroll under their own PAYE reference. This is a shift away from earlier proposals which would have made agencies responsible for deducting PAYE prior to making payment to umbrella companies, a move that would have introduced significant complexity for the supply chain.  

Assuming ministers approve HMRC’s recommendation, the current operational model remains intact. But that doesn’t mean the market is staying the same. 

The new legislation is expected to introduce stricter obligations around tax compliance, enforcement, and supply chain accountability. In practice, recruiters will need to take steps to ensure their umbrella partners are compliant, or risk facing a tax bill. 

Why this matters to recruiters 

The days of turning a blind eye to non-compliant umbrellas or selecting an umbrella company purely on commercials are over. With recruiters set to become jointly liable for their umbrella companies tax bills, the risks of working with the wrong provider have never been higher. 

That’s why recruiters need to ask themselves: 

• Is your current umbrella partner fully transparent about tax and payroll processes? 

• Are they independently checked, accredited, and well-established in the market? 

• Can you satisfy yourself that they are not cutting any corners based on the commercials that they offer, including their take-home pay illustrations for employees? 

Brookson - A proven partner in a changing market 

Brookson has been supporting recruiters and contractors for over 30 years. We’ve weathered every major legislative change and have always been at the forefront of compliance. 

Here’s what partnering with Brookson offers: 

• Fully compliant payroll services - all employees employed by the same entity and payrolled under its PAYE reference number. 

• FCSA-accredited - we are founder members of the FCSA and have passed our compliance reviews every year since its inception in 2008, giving agencies assurance of best practice. 

• Dedicated support for agencies and contractors with clear, proactive advice as legislation evolves. 

We’ve consistently engaged with HMRC and industry stakeholders to shape policy and represent the needs of ethical recruiters. That dialogue continues as we prepare for the next phase of reform. 

What should recruiters do now? 

• Review your PSL - make sure your umbrella partners are credible, accredited, and proven. 

• Get ahead of compliance - don’t wait until April 2026 to make changes.  As the days and weeks go by, more and more assignments will span across the April 2026 implementation date – avoid having to migrate workers mid assignment by locking down your preferred supplier list now. 

• Speak to your clients - are they aware of the risk you will be sheltering them from (if there is no agency the client will be at risk).  This enhances your commercial proposition to them. 

• Don’t just rely on contracts or insurance policies to cover this risk for you - you won’t know how effective they are until you need to call upon them, by which time it is too late to effectively manage this risk. 

• Talk to Brookson - we are a professional services business run by Chartered Accountants, Chartered Tax Advisors and Solicitors and we’re here to support you through the changes ahead. 

Let’s get it right, together. 

Now more than ever, recruiters have a responsibility to work with trusted umbrella providers. Brookson is ready, and we’re here to help you be ready too. 

Learn more about Brookson