HMRC clarifies UK agency liability where agency and client are overseas

HMRC now says that, where an agency and its client are both non-UK resident and there are other parties in the labour supply chain, the UK agency closest to the client is jointly and severally liable alongside the umbrella companyGOV. The clarification affects how agencies identify the party sharing responsibility for unpaid umbrella-company PAYE in cross-border arrangements.

The revised overseas-intermediaries guidance changes two elements of the previous explanation. It replaces the reference to an overseas agency and the employer it contracts with with a test referring to the agency and client both being non-UK residentGOV. It also identifies the umbrella company, rather than the client, as the party alongside which the UK agency is liableGOV. This is a clarification of HMRC's explanation of the rules, with the commencement guidance continuing to specify qualifying umbrella company payments made on or after 6 April 2026GOV; payments before that date are excludedGOV.

The separate case involving a UK client remains distinct. HMRC says that, if a worker is placed with a UK client by or through a non-UK resident agency, the client is jointly and severally liable alongside the umbrella companyGOV. The residence of the client therefore matters when working through the overseas-intermediary guidance.

For other supply chains, HMRC explains that a client contracting directly with an umbrella company shares liability with that company. Where intermediaries are interposed, the agency holding the contract with the client to supply the worker shares liability with the umbrella company. Connected parties also need attention: where that agency and the umbrella company are connected, the client is jointly and severally liable alongside both of them.

Joint and several liability covers amounts payable by the umbrella company under the PAYE provisions in relation to a qualifying umbrella company payment. HMRC says it does not matter which party pays, or how much each contributes, provided the amount is paid in full. The umbrella company remains responsible, as employer, for operating PAYE correctly and paying the tax and National Insurance contributions due. If amounts remain unpaid, HMRC says it will pursue the relevant parties, although circumstances may justify recovery from the umbrella company.

The legal basis identified by HMRC is section 61Y of Chapter 11, Part 2 of the Income Tax (Earnings and Pensions) Act 2003, with connectedness determined under section 993 of the Income Tax Act 2007.