The recruitment industry has faced growing compliance pressures in recent years, particularly when placing self-employed or CIS candidates. Since the introduction of the intermediaries legislation (s44 ITEPA) in 2014, recruitment agencies have been in HMRC’s sights, carrying liability for employment taxes if a sole trader’s employment status is successfully challenged.

This is only one part of the evolving compliance landscape. Changes in IR35 off-payroll working rules and new government plans to crack down on unprincipled umbrella companies mean that agencies and end-hirers must take a proactive approach to protect themselves from unnecessary tax liabilities.

Compliance Challenges: Sole Traders and PSCs

1. Sole Traders
   Agencies must be confident in their tax compliance processes when placing sole traders. Failure to manage these arrangements correctly can result in unexpected employment tax liabilities for the agency.
   
   
2. Limited Companies and IR35 Off-Payroll Working
   For workers operating through Personal Service Companies (PSCs), the liability for employment taxes can shift from the end client depending on their IR35 status. Ensuring proper compliance is crucial to avoid financial penalties and maintain strong client relationships.

New Rules for Umbrella Companies and PAYE Liabilities

The recent Budget introduced significant changes targeting umbrella companies and their role in payroll compliance. Starting April 2026, recruitment agencies—or end-clients in the absence of an agency—will become responsible for accounting for PAYE deductions made by umbrella companies that pay temporary workers.

This means:

• If a non-compliant umbrella company handles payroll, your agency or client could face the tax liability for unpaid PAYE.
• Agencies and hirers must conduct robust due diligence to ensure the compliance of any umbrella company they refer to or face significant risks.
  
  

How The Guild Can Help

At The Guild, we offer a fully compliant solution to mitigate these risks. By engaging freelance workers on a self-employed basis, we eliminate the possibility of PAYE liabilities transferring to agencies or hirers. Our process ensures compliance with all legislative requirements, giving agencies the peace of mind they need to focus on their business.

When Self-Employment Isn’t an Option

While we champion self-employment and operatives’ freedom of choice, we recognise that this model doesn’t fit every situation. Certain labour rules on construction projects may complicate the use of self-employed operatives, and some assignments may fall “inside IR35,” leaving PAYE as the only viable option.

In these cases, umbrella PAYE can be a useful solution. Agencies and hirers must ensure they work only with reputable and compliant umbrella providers to avoid liability risks.

Why Choose The Guild?

• Comprehensive Compliance: Whether you’re placing sole traders, PSCs, or looking to place temporary workers via an umbrella company, we ensure full compliance with HMRC regulations.
  
  
• Reduced Risk: Avoid the potential transfer of PAYE liabilities and other penalties with our expert support.
  
  
• Tailored Solutions: From self-employment alternatives to PAYE, we’ll help you find the right option for every worker and project.
  
  

Take Action Today

With increasing compliance pressures and HMRC’s clampdown on the horizon, now is the time to evaluate your agency’s processes. Don’t wait until April 2026 to make changes—get ahead of the curve with The Guild’s compliance expertise.

Feel unsure about your compliance? Contact us today to explore how we can safeguard your agency and protect your clients from unnecessary risk.

The Guild – where compliance meets confidence.