ESM2420 - Umbrella companies legislation: Chapter 11 ITEPA 2003- joint and several
Source: gov.uk (2025-09-18)


This guidance is effective from 6 April 2026 and relates to draft legislation expected to be included in the next Finance Bill. The legislation and guidance is subject to revision before or during the process of Parliament considering the Bill.

Section 61Y Chapter 11 of Part 2, ITEPA 2003

The liability will sit jointly and severally depending on who the relevant parties are, for further information about defining umbrella companies see ESM2415-defining umbrella companies (https://www.gov.uk/hmrc-internal-manuals/employment-status-manual/esm2415).

Joint and several liability

This means that both parties are liable to pay any amount payable, in accordance with the PAYE provisions, by the umbrella company in relation to a qualifying umbrella company payment. It does not matter which party pays or how much each party pays as long as the amount is paid in full.

PAYE provisions for these purposes means the provisions of Part 11 ITEPA 2003 or PAYE regulations.

Umbrella company contracts directly with the client

Where the client contracts directly with the umbrella company, the client will be the relevant party and the liability will be joint and several between the umbrella company and client.

More than one intermediary in the contractual chain

If there is one or more intermediaries contractually interposed in the supply chain between the umbrella company and the client, the agency in the supply chain who has a contract with the client to supply the worker will be joint and severally liable with the umbrella company.

If the intermediaries in the chain are connected

If the agency and the client are connected the measure will apply as normal. The agency that contracts with the client will be jointly and severally liable alongside the umbrella company.

If the agency that contracts with the end client and the umbrella company are connected, then the client will be jointly and severally liable alongside the umbrella company and the agency.

If the client and the umbrella company are connected, then the measure will apply as normal. If there are one or more agencies in the contractual chain, then the agency that holds a contract with the end client will be jointly and severally liable alongside the umbrella company. If there is no agency in the labour supply chain, the client and umbrella company will be jointly and severally liable.

"Connected" for these purposes takes its meaning from Section 993 of the Income Tax Act 2007.

Overseas intermediaries

If a worker is placed with a UK client by or through a non-UK resident agency, then the client is jointly and severally liable alongside the umbrella company.

Where the agency and employer they contract with are non-UK resident and there are other parties in the chain, the UK agency closest to the client is jointly and severally liable alongside the client.

For guidance where a worker is employed by a company not resident in the UK please see ESM2039- the employer for tax purposes. (https://www.gov.uk/hmrc-internal-manuals/employment-status-manual/esm2039)

Recovery from relevant parties

As the worker's employer, the umbrella company is required to correctly operate PAYE in accordance with the PAYE provisions, including paying to HMRC any PAYE tax (and NICs) due. Whilst not the employer, the relevant party is jointly and severally liable for paying the PAYE tax (and NICs) due.

If any, or all, of the PAYE tax (and NICs) is not paid, HMRC will pursue recovery of the unpaid amounts from the relevant parties. However, there may be some circumstances where it is appropriate for HMRC to pursue recovery from the umbrella company.