Article / 22 Sep 2026

Autumn is here but the umbrellas are down: the PAYE risks hiding in plain sight

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Gateley Legal

The trade press ran an article on the liquidation of an umbrella company, Accuratas Green, last week. The umbrella company went into liquidation owing circa £1m to HMRC. A meaty chunk of the HMRC debt appears to relate to PAYE as the umbrella company’s business involved supplying its employees as temporary workers to clients. On 6 April 2026 new anti-avoidance legislation governing PAYE defaults by umbrella companies took effect. As we are going to see, the PAYE debt does not die with an insolvent umbrella company, but it can be transferred to other parties in the labour supply chain.

  • What does the umbrella companies’ anti avoidance legislation do?

    Essentially the legislation defines an umbrella company as a person which supplies its employees to clients on the basis that those employees provide services to the client. The umbrella companies’ legislation treats other parties in the labour supply chain as jointly and severally liable for an umbrella company’s PAYE. 

    So, if an umbrella company supplies its employees to a client company and it defaults on its PAYE obligations the client is jointly and severally liable for the default. The joint and several liability does not just apply to insolvency situations, such as Accuratas Green, but to any PAYE payable in respect of the relevant employees. In effect, other parties in the labour supply chain are being required to stand shoulder to shoulder with the umbrella company for the PAYE.

  • Why is this relevant in the transactional context? What needs to be done?

    Companies routinely use workers supplied to them by umbrella companies for a variety of reasons ranging from the need to source temporary workers to de-risking themselves from employment law risks (because the workers are employed by the umbrella).

    Companies which are preparing for sale need to vet and undertake diligence on their labour supply chain to establish whether any umbrella companies which they use are fully PAYE compliant. Logistically if this exercise is handled at the seller level, then it may be less disruptive to the timetable than a buyer led diligence process. (Practically it may be easier for the company which is preparing for sale to vet and undertake diligence on its labour supply chain rather than having the buyer do this so as to prevent the umbrella company from knowing that a sale is in the offing.)

    Further, companies which are preparing for sale should seek indemnities from any umbrella companies they use for any losses caused by those umbrella companies’ PAYE non-compliance.

    Self-evidently any failure by the company preparing for sale to take these steps could result in at best transactional delays and indemnities to the buyer and, at worst, price chips.

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