THOUGHT LEADERSHIP
Why HMRC must modernise ahead of the 2026 liability shake-up
The UK government is introducing new compliance rules in April 2026, which will make employment agencies and end clients jointly liable for any unpaid payroll taxes when using non-compliant umbrella companies. Varun Monteiro, CEO of Finity, discusses the policy shift, the technology gap and the solution.
In April 2026, HMRC will roll out new Joint and Several Liability rules that will reshape the entire compliance landscape. This legislation will make employment agencies and end clients jointly liable for any unpaid payroll taxes when using non-compliant umbrella companies.
For the temporary labour market, these changes represent a major shift in how tax compliance is monitored and governed, meaning liability sits much higher up the supply chain with potential financial penalties for any non-compliance.
However, despite the high-stakes nature of this regulatory overhaul, there is a belief within the sector that HMRC’ s existing digital infrastructure will not support the effective delivery and adherence to this policy. Indeed, our recent survey found that almost 80 % of finance professionals in recruitment agencies believe HMRC must modernise its systems to make compliance to this policy workable.
With the April 2026 deadline looming, it’ s critical that the government works fast to address these concerns, as without the digital infrastructure to support it, the policy will falter.
The policy shift: The importance of tackling non-compliance in the umbrella market
The key aim of this reform is to tackle tax avoidance and close the tax gap. The changes are intended to protect temporary workers from large, unexpected tax bills where non-compliant umbrella companies have failed to pay on their behalf. They will also help ensure the temporary labour market operates on a level playing field by preventing fraudulent operators under-cutting businesses operating compliantly.
While this new legislation is welcomed by the industry as a means to help improve compliance in the market as well as prevent illegitimate or unscrupulous operators from entering it, the reality is that the systems, processes, integrations and technologies that are needed to deliver it effectively, simply do not exist.
The technology gap: What’ s missing today
Of those we surveyed, 79 % said HMRC needs to do more to integrate its systems and simplify its processes. A further three-quarters expect to rely on new technologies to help manage compliance, conduct realtime audits and, ultimately, adhere to these new legal obligations.
Varun Monteiro, CEO, Finity
HMRC’ s Transformation Roadmap is a positive step forward and shows alignment with the sector’ s anticipated reliance on strong digital infrastructure. However, there are still significant challenges related to verifying whether tax liabilities have been accurately reported and settled in their supply chain. This lack of efficient, real-time access
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