PAYE Rules for Labour Supply Chains with Umbrella Companies
Summary
HMRC has issued new guidance detailing PAYE rules for labour supply chains that include umbrella companies, effective from April 6, 2026. The guidance aims to clarify responsibilities and ensure correct tax and National Insurance contributions are paid, particularly in sectors prone to non-compliance.
What changed
HMRC has published new guidance outlining specific Pay As You Earn (PAYE) rules that will apply to labour supply chains involving umbrella companies starting April 6, 2026. This guidance, linked to Chapter 11 of ITEPA 2003, clarifies the responsibilities of various parties within the supply chain, including employment businesses and umbrella companies, to ensure accurate tax and National Insurance deductions. It addresses potential tax avoidance schemes and aims to provide clarity on when these rules apply.
Affected entities, particularly employment businesses and umbrella companies operating within labour supply chains, must review this guidance to understand their obligations and ensure compliance by the April 6, 2026, effective date. Failure to comply may result in penalties and increased scrutiny. The guidance also points to resources such as the Employment Status Manual, the Construction Industry Scheme (CIS) guidance, and an employment status checker tool to help businesses navigate these new requirements and protect themselves from non-compliant actors in their supply chains.
What to do next
- Review HMRC guidance on PAYE rules for labour supply chains with umbrella companies.
- Assess current business practices to ensure compliance with new rules effective April 6, 2026.
- Verify the compliance status of umbrella companies and other intermediaries within the supply chain.
Penalties
The guidance implies that non-compliance with PAYE rules and tax avoidance schemes can lead to penalties and scrutiny, though specific penalty amounts are not detailed in this overview document.
Source document (simplified)
Legislation and guidance
Sources of guidance that provide further information.
Guidance that provides more detail about the rules for operating PAYE when there are umbrella companies in a supply chain, including when they apply.
PAYE rules for labour supply chains that include umbrella companies from 6 April 2026
Find out what the rules mean for you.
Employment Status Manual - Umbrella companies legislation: Chapter 11 ITEPA 2003 (from 6 April 2026)
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