ESM2430 - Umbrella companies legislation: Chapter 11 ITEPA 2003- quantifying the liability
This guidance is effective from 6 April 2026 and is subject to revision.
The financial liability for the agency or end client under joint and several will cover the full extent of what the umbrella company should be treating as employment income in accordance with the PAYE provisions including any amounts that are paid as disguised employment income such as supposed loans.
Worker provides services via one agency
In many cases umbrella company employees will supply their services via a single agency during a pay period. Where this is the case, the liability arising on the umbrella company to account for the employee's Income Tax, Student Loan repayments and primary Class 1 NICs, together with paying secondary Class 1 NICs, will all relate to this single agency and the relevant party, see ESM2420 joint and several, will be jointly and severally liable for the payment of this full amount.
Worker provides services via multiple agencies
In some cases, an umbrella company will supply a worker's services via multiple agencies during a pay period. Here, the umbrella company will amalgamate the payments received from various agencies into a single payment of earnings to the worker. The legislation limits the joint and several liability to the amount that arises in respect of the provision of the services to each client. The liability that arises on the umbrella company on the single payment made to the employee will therefore need to be apportioned between the agencies. Where HMRC do not hold sufficient information to apportion the liabilities then they will assess the liability using reasonable judgment.
Qualifying umbrella company payment
When referring to amounts paid for work to a client, the legislation uses the term 'qualifying umbrella company payment'. This means a payment made in respect of the employment of the worker to the extent that it is not in respect of the provision of services to a person other than the client.