PAYE Liability Shifts to Agencies: What Contractors and Agencies Must Know

I n July 2025, draft legislation (known as “L-Day”) is expected to be laid before Parliament, with full implementation of PAYE liability shift due on 6 April 2026. Under the new rules, if an umbrella company fails to remit PAYE tax or NICs, HMRC can recover the liability from the contracting agency or end client instead of the umbrella alone.

Why the Change?

The government’s recruitment sector reform aims to:

Ensure tax collection by broadening liability beyond umbrella companies.
Deter non-compliance in the supply chain.
Protect agencies and clients by clarifying responsibilities and requiring robust checks.

What Should You Do

Agencies must update supplier contracts to include liability clauses and perform ongoing due diligence on umbrella partners. Contractors should:

Confirm their agency has compliant contracts in place.
Understand where liability lies in their supply chain.
Monitor PAYE submissions with their agency’s support.

How ASA Pay Solutions Supports You

ASA Pay Solutions offers dedicated guidance without automated systems:

Liability Review
Manual audit of current supply-chain contracts and risk exposure.
Contract Clause Templates
Legally vetted wording to allocate and cap liability appropriately.
Compliance Checklists
Step-by-step processes to verify umbrella partner status and payments.
Ongoing Telephone & Email Support
Direct assistance as you update processes ahead of April 2026.

“ASA Pay’s contract review ensured our agency was protected".

—Mark Evans, Operations Director, Connect Staff

PAYE Liability Shifts to Agencies: What Contractors and Agencies Must Know

How ASA Pay Solutions Supports You

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