The crackdown targets fraudulent use of “umbrella companies” – sometimes legitimate but often used by rogue operators who fail to pay employment taxes while acting as the worker’s nominal employer. From April 2026 new laws make recruitment agencies legally responsible for ensuring correct employment taxes are paid for temporary workers; where no agency is used the end client company will be liable.
The Treasury says the change stops wilful tax avoidance, protects honest employers from unfair competition, and prevents workers being left in vulnerable positions; the change is presented as part of the government’s wider tax compliance agenda.
HM Treasury estimates about 275,000 workers a year are supplied by cowboy operators using umbrella companies to evade tax. HMRC will be able to pursue agencies or end clients when umbrella companies fail to pay the right tax. The government expects the reforms to raise nearly £900 million in year one and almost £3 billion over five years.
