Sourcing Labour from Third Parties? Due Diligence Required

A final reminder for any businesses that source workers through third parties, such as agencies or umbrella companies. New rules will come into effect from 6 April 2026 that could have significant tax implications. Under the new legislation, businesses may become jointly and severally liable for PAYE and National Insurance contributions relating to workers supplied through these arrangements if the third party fails to meet its tax obligations to HMRC. This means that if an agency or umbrella company in the labour supply chain does not correctly account for PAYE or NIC, HMRC may seek to recover the unpaid amounts from other parties involved in the arrangement, including the end client. Given the potential financial exposure, it is important for businesses that rely on outsourced labour to review their current arrangements and understand how the new rules may apply. Carrying out appropriate due diligence on labour providers and understanding how workers are engaged within the supply chain will be essential to reduce the risk of unexpected tax liabilities. If your business regularly engages workers through agencies or umbrella companies, it would be sensible to review these arrangements before the new rules take effect in April 2026. We would be happy to help you assess your current position and ensure your processes are compliant. At A&C Chartered Accountants, we're not just accountants; we're your partners in success. Based in Manchester, our experienced team handles everything from managing limited company and sole trader accounts to expertly navigating tax returns. Beyond financials, we play a crucial role in driving your business’s growth, strategically steering it towards success with confidence and clarity.

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