The Umbrella Reform Summit hosted by QDOS on 16th October 2025 provided a comprehensive update on the major legislative changes poised to reshape the UK umbrella company sector from April 2026. The summit focused on recent draft legislation under the Finance Bill 2025–26, which introduces joint and several liability for agencies and, in some cases, end clients regarding PAYE tax compliance for umbrella workers. This reform aims to combat tax non-compliance, close loopholes around disguised remuneration, and protect both workers and compliant operators across the temporary labour market.
Key Legislative Changes
Recruitment agencies placing workers through umbrella companies will be jointly and severally liable for unpaid PAYE taxes if the umbrella supplier fails to comply.
In supply chains with multiple intermediaries, the agency closest to the hiring organisation (including Managed Service Providers) bears the liability; without an agency, liability may fall to the end client.
For the first time, the law explicitly defines "umbrella company arrangements" to help close down schemes exploiting mini-umbrellas and disguised remuneration tactics.
There will be a new legal obligation for agencies and clients to conduct rigorous due diligence of umbrella suppliers, focusing on FCSA accreditation, safe payments audits, and eliminating ties with tax avoidance schemes.
Compliance and Practical Impact
The summit emphasised the need for supply chain auditing, updating preferred supplier lists, revising contracts, and implementing robust oversight procedures to mitigate the new risks.
Attendees discussed how blanket bans on outside IR35 contracts and additional administrative burdens might further pressure already-stressed umbrella businesses.
QDOS, trade bodies, and legal experts reiterated that compliant practices now represent both regulatory protection and a source of competitive advantage.
Next Steps and Industry Reaction
The QDOS panel encouraged recruitment businesses to begin internal education, review supplier arrangements, and actively prepare for more prescriptive operational guidance expected before April 2026.
The reform is part of a broader government commitment to fairness and transparency in the temporary labour market—ensuring workers are protected and taxes are properly paid.
The summit closed with a call for ongoing engagement as the legislation is finalised and guidance is released, with voices from APSCo and FCSA highlighting the importance of collaboration between agencies, umbrella providers, and end clients.
The overarching message was clear: the era of light-touch umbrella company regulation is ending. Agencies and clients must now drive compliance proactively or face significant financial and operational consequences from April 2026 onward.
