Any Umbrellas to Fix Today? Draft Legislation shakes up labour supply chains?
August 5, 2025
When the umbrella breaks, who gets soaked?
The UK government has published draft legislation that could dramatically reshape how umbrella companies and labour supply chains operate from April 2026.
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Sitting as a new chapter in Part 2 of ITEPA 2003, the proposed rules target tax non-compliance in the umbrella sector and bring strict liability to the top of the chain — including end clients, recruitment agencies, and Managed Service Providers (MSPs).
It’s a decisive move. And one that will force those involved in labour supply chains in the UK, especially in sectors like health, logistics, and IT, to re-evaluate how they engage workers and manage employment tax risk.
With less than a year to prepare, decisions will need to be made… and quickly.
What’s Changing?
In short, liability is shifting up the labour supply chain.
From April 2026, if an umbrella company fails to properly account for PAYE and NICs, the top agency (i.e. the agency holding the contract with the end client) or the end client, if no agency is involved, will be jointly and severally liable.
This applies even if you carried out due diligence, were misled, or only engaged with an umbrella through an MSP. There is no statutory defence.
The liability covers any employment intermediary, not just umbrella companies — including Employers of Record (EoRs), second-tier suppliers, and some consultancies.
What Does It Mean in Practice?
This is strict liability, not negligence-based. That means:
- It doesn’t matter if the end client or agency did everything “by the book.” If PAYE/NICs go unpaid, they’re on the hook.
- Even if a firm relies on industry accreditations, uses a “compliant” umbrella company, or performs real-time checks, it won’t be enough to avoid the tax bill if HMRC comes calling.
- The legislation also applies to ‘purported umbrella companies’, which are intermediaries that promise PAYE but instead pay workers gross, or via Personal Service Companies (PSCs).
Impact on Agencies and MSPs
MSPs in particular face tough questions. Many may now:
- Drop second-tier supplier models
- Push for direct contracts only
- Require PAYE-only solutions from their supply partners
Agencies reliant on umbrella support may find themselves squeezed off preferred supplier lists, especially if they can’t offer compliant PAYE alternatives.
Meanwhile, some umbrella companies may reposition themselves as payroll agents, handling money but not employing workers.
What About End Clients?
If there’s no agency between them and the umbrella, the end client becomes liable. That includes cases where they engage an EoR or consultancy. As such, end clients will now need to:
- Perform due diligence on every intermediary that “employs” or “purports to employ” workers
- Review any “consultancy” arrangements that might conceal disguised umbrella models
- Consider insurance or indemnity solutions, while being alert to Managed Service Company (MSC) risks under the tax legislation
Who Is Caught – and Who Isn’t?
Caught:
- Anyone employed (or supposedly employed) by an intermediary supplying labour
- Employers of Record (EoRs)
- Benched consultancy workers on time-and-materials models
- Some “hire, train and deploy” schemes
- Government department secondments
Not caught:
- PSC contractors, provided IR35 is followed and they’re not paid via a ‘purported umbrella’
- Traditional agency workers paid under agency PAYE (though note: agency worker rules still apply)
- CIS subcontractors, unless working under supervision, direction, or control
Will Accreditation or Insurance Help?
New real-time accreditation models and umbrella compliance tools are emerging. Some come bundled with insurance policies that cover the agency or end client if the umbrella defaults.
This could be a helpful commercial solution, but it won’t eliminate liability.
Due diligence checks still matter, and accreditation alone won’t provide a statutory defence under the new law.
Users should ensure:
- Insurance policies are robust and not caught by MSC rules
- Procedures meet standards under the Criminal Finances Act, especially around facilitation of tax evasion
- GDPR compliance is managed if using platforms involving personal data flows between parties
Will This Lead to Wider Change?
Almost certainly. Some consequences to expect:
- Increased use of PSC models in sectors where IR35 enforcement feels low-risk
- Migration from umbrella to CIS self-employed models in construction
- Movement toward statement of work/output-based contracts, especially in consultancy-heavy sectors
- Shift to umbrella companies acting only as payroll agents, not full employers
- Greater pressure on asset-based lenders to underwrite agencies now jointly liable for tax errors
- Agencies relying on cashflow funding from umbrella companies may need new arrangements — e.g. invoice discounting or factoring — but these come with fresh credit risks if joint tax liabilities apply.
Final Thoughts
This is a seismic shift for the UK’s labour supply industry.
From April 2026, tax failures by umbrella companies won’t be a downstream problem — they’ll land directly with those upstream. No defences, no excuses, no safety net.
For end clients, MSPs, and agencies, now is the time to:
- Map labour supply chains
- Review who employs whom
- Evaluate whether current workforce models still make sense
- Consider the cost and risk of "cheap" labour
Because, from April 2026, when the umbrella breaks, those at the top will get very wet.
Need support understanding how this will impact your organisation?
Mosaic Chambers Group advises companies, agencies, and contractors on complex compliance, UK tax law, and labour supply chain structures. Get in touch for tailored support.
Navigating the UAE Employment Visa Process in 2026 Relocating to the United Arab Emirates for employment offers significant professional and financial opportunities. However, the UAE employment visa process is structured, compliance-driven and time sensitive. Understanding each stage in advance avoids unnecessary delays and protects both employer and employee from regulatory issues. Below is a comprehensive, easy-to-follow guide to the UAE employment visa process as it stands in 2026. Step 1: Securing a Confirmed Job Offer The UAE employment visa process begins with a formal job offer from a UAE-licensed entity. Only an employer registered with the relevant mainland authority or free zone authority can sponsor an employee. The employer becomes the visa sponsor and assumes legal responsibility for: Applying for the work permit Processing the residence visa Ensuring compliance with UAE labour law Covering government application fees (in most cases) Employees cannot independently apply for a standard employment visa without sponsorship. Step 2: Work Permit Application (Entry Permit Approval) Once the employment contract is signed, the employer applies for a work permit (also known as a labour approval) through the Ministry of Human Resources and Emiratisation (MOHRE) or the relevant free zone authority. Documents typically required include: Passport copy (valid for at least six months) Passport-size photographs Signed employment contract Attested educational certificates (if required for the role) If the employee is outside the UAE, an entry permit is issued, allowing them to enter the country legally for employment purposes. If the employee is already inside the UAE on a visit visa, status adjustment procedures apply. Step 3: Entry to the UAE (If Applying From Abroad) For applicants outside the UAE, the entry permit allows legal entry into the country. Once inside the UAE, the individual must complete the residency formalities within the validity period of the entry permit (usually 60 days). Timing is critical at this stage. Failure to complete the process within the permitted window may result in fines. Step 4: Medical Fitness Test All employment visa applicants must undergo a mandatory medical examination at an approved UAE medical centre. The test typically screens for: HIV Tuberculosis Hepatitis (in certain categories) The medical fitness certificate is a mandatory component of the residence visa application. Processing time: usually 24–72 hours depending on service speed selected. Step 5: Emirates ID Biometrics The applicant must apply for an Emirates ID, which serves as the UAE’s official identification card. This process includes: Biometric data capture (fingerprints and photograph) Identity verification The Emirates ID is linked directly to the residence visa and is essential for: Opening bank accounts Renting property Obtaining a driving licence Accessing utilities and telecom services Step 6: Residence Visa Stamping Following medical clearance and Emirates ID application, the residence visa is issued and stamped electronically against the passport record. Employment residence visas are typically valid for: 2 years (mainland companies) 2–3 years (depending on free zone authority) Once issued, the employee is legally resident in the UAE and may sponsor eligible dependants (subject to salary thresholds). Key Considerations in 2026 1. Free Zone vs Mainland Sponsorship Visa procedures differ slightly between mainland entities and free zone authorities. Free zones operate under independent regulatory frameworks, although federal immigration approval remains central. The choice between mainland and free zone employment has broader implications, including: Corporate structuring Tax residency status Social security considerations Family sponsorship options These should be assessed before finalising relocation plans. 2. Employment Visa vs Other UAE Visa Categories The UAE also offers: Green Visas (for skilled professionals and freelancers) Golden Visas (long-term residence for investors and high earners) Investor/Partner Visas For entrepreneurs and senior executives, an employment visa is not always the optimal route. Strategic structuring may offer longer validity and greater flexibility. 3. Tax Residency Implications The UAE does not levy personal income tax. However, relocating professionals must consider: Exit tax implications in their home country UK Statutory Residence Test (for British nationals) Split-year treatment Ongoing ties and centre-of-vital-interests rules Corporate tax exposure for business owners Inadequate pre-departure planning can result in unintended dual tax exposure. 4. Corporate Tax and Employment Structuring With the introduction of UAE Corporate Tax, business owners relocating to the UAE must assess: Whether they will remain directors of overseas entities Permanent establishment risks Substance requirements Intercompany arrangements Employment structuring must align with the broader corporate and tax strategy. Why a Structured Relocation Approach Matters Many professionals treat the employment visa as a simple administrative formality. In practice, it forms part of a much larger relocation framework that includes: Tax residency planning Wealth structuring Asset protection Banking arrangements Property acquisition Family visa coordination A piecemeal approach often creates long-term complications. How Mosaic Chambers Group Supports Your Move to the UAE At Mosaic Chambers Group, we provide integrated advisory services for internationally mobile individuals and entrepreneurs. We coordinate: Pre-departure UK tax planning UAE tax structuring advice Cross-border compliance Local regulatory compliance We work alongside trusted UAE-based partners to manage: Visa processing Company formation Corporate structuring analysis Family sponsorship applications Wealth protection strategies Relocating to the UAE should be strategic, compliant and financially efficient - not reactive. Speak to Our Advisory Team If you are considering accepting a UAE job offer or relocating your business operations to the Emirates, we recommend obtaining professional tax and structuring advice before finalising your move. Early planning protects your position, reduces risk and ensures your move to the UAE is commercially sound and fully compliant. Get in touch with our team today to begin your relocation strategy with clarity and confidence.
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