ESM2410 - Umbrella companies legislation: Chapter 11 ITEPA 2003- when the legislation applies and commencement
This guidance is effective from 6 April 2026 and is subject to revision.
Section 61Y Chapter 11, Part 2 ITEPA 2003
The legislation applies where all the following are met:
- An individual (the worker) personally provides services, or enters into arrangements with a view to personally providing services, to another person (the client)
- The worker is employed for tax purposes by a third person (the umbrella company) who carries on a business (whether or not with a view to a profit and whether or not in conjunction with any other business) of supplying labour, and
- The umbrella company arrangement conditions are met.
The umbrella company arrangements conditions are that:
- There is a contract between the umbrella company and the client or another person.
- Under or in consequence of the contract the services are provided, or the umbrella company is paid, or otherwise provided with consideration for the services and
- If the contract is not between the umbrella company and the client, there is a further contract between the client and another person and the provision of the services or payment or other consideration for the services is also a consequence of that other contract (whether directly or as a result of a series of contracts involving other persons).
Commencement
The new rules take effect from 6 April 2026 with any qualifying umbrella company payment made on or after this date subject to the rules.
Payments made before this date are not subject to the new rules.
Example
Val is employed by an umbrella and provides her services to the end client via a contract which is held by an agency. Qualifying payments made from 6 April 2026 onwards will be subject to the new rules, with the liability resting jointly between the umbrella company and the agency. Payments made up to 5 April 2026 are excluded from the new rules.