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What is Joint & Several Liability?

Draft legislation released on 21st July 2025 introduces Joint & Several Liability for Agencies, MSPs and End Clients who utilise umbrella company arrangements.  This will make Agencies, MSPs and End Clients – depending on the nature of the supply chain – jointly and severally liable for unpaid PAYE & NICs should the umbrella fail to remit this to HMRC. 

Tax Liability

A new Chapter 11 is being added into ITEPA 2003 which sets out the tax liability rules. This will be effective from 6th April 2026.

Joint & Several Liability will apply to the 'Relevant Party' in the supply chain - which we will cover more of later - who will share liability for PAYE & NICs payments should an Umbrella Company not remit them to HMRC.

Key points to note in terms of tax liability:

  • Applies to the whole amount due
  • Includes shortfalls and underpayments
  • Regardless of the reason (fraud, mis-calculation etc) 
  • There are no statutory excuses for agencies, MSPs or end clients
  • Offshore entities in the supply chain will be ignored

A broad new definition of an 'Umbrella Company' does mean that its likely employment businesses and intermediaries that engage workers on a 'contract for service' (employment) will be in scope of these regulations.

But the good news is that Agencies are not being made the 'employer' for tax purposes - so it is very much business as usual.

The Umbrella Company:

  • Remains responsible for accounting for PAYE & NICs
  • Uses its PAYE Reference number when employing workers
  • Remains responsible and liable for all employment law and employee rights for the workers.

What does Relevant Party mean?

'Relevant Party' is the top most agency in the supply chain which holds the contract with the end client. This entity holds JSL with the umbrella even where there are multiple agencies in the supply chain.

If there is no agency involved, then the end client will hold JSL with the umbrella company. This holds true in other circumstances as well:

  • if an MSP or agency is connected with the umbrella company (common directors or shareholders) then the end client remains holding JSL.
  • if the topmost agency is not UK based, the end client is likely to still hold JSL

MSPs are included as relevant parties even if they aren't in the payment chain.

So where does the liability sit?

Lets look at a few scenarios where the Orange box reflects the 'Relevant Party' that will hold JSL with the Umbrella:

Normal Supply Chain
Complex Agency Supply Chain
MSP Supply Chain
Direct Engagement
Connected Agency & Umbrella
Offshore Entities are Ignored

If you have any questions about how this legislation impact your agency, please contact your Account Manager or Agency Director to see how NASA can help.