Contractors, Joint & Several Liability’s unintended consequences are already piling up

The taxman saying in November 2025 that Joint and Several Liability (JSL) rules for umbrella companies will "protect temporary workers" might make contractors raise their eyebrows today — less than a month before the rules bite.

What are the reports from umbrella company contractors as JSL looms?

We're hearing not always pleasant reports that umbrella contractors are being effectively forced to move to another umbrella company, ahead of the JSL rules applying from April 6th 2026.

Therefore, is it less a case of 'Protection' and more a case of 'Compulsion'?

Maybe, and let me explain why and how, writes Lucy Smith, managing director and founder of Clarity Umbrella.

What is the meaning of Joint & Several Liability?

On April 6th 2026, the contractor industry will see HMRC's Joint and Several Liability (JSL) legislation come into force.

JSL is aimed at ensuring HMRC can go after unpaid tax liabilities (i.e. umbrellas' clients become jointly and severally liable for umbrellas' tax debts).

What two things does April's JSL legislation impose on recruitment agencies?

To achieve that goal, the legislation is placing emphasis on contractor recruitment agencies to do two key things.

1. Know who their agency is working with, and,

2. Trust that all is well from a 'payment submission for taxes' perspective with HMRC.

What three effects of JSL are already being seen?

But as we get very close to JSL's start date on April 6th, we're seeing:

1. A closing down of Preferred Supplier Lists (PSLs),
2. Managed Service Providers (MSPs) dictating to 'tier two' agencies (these are the agencies that have taken a role advertised by an MSP and then placed the contractor candidate, thereby making them the second agency behind the MSP, behind the client)
3. Workers, i.e. the umbrella company's contractors (its employees technically), are being forced to move to another umbrella company.

On the record…

Let me just say, I understand the caution that is being shown here, because if you're a client of a brolly who shortfalls to HMRC, there is tax risk for you, the agency (and if there's no agency, the HMRC risk is for the end-client).

Are umbrella contractors being forgotten in the rush to prepare for JSL?

That said, any consideration for contractors appears to have been overlooked.

It's sad, but also a bit ironic, given that HMRC has identified contractors as the beneficiaries of the JSL legislation.

There will be exceptions, of course, but generally speaking, the position of umbrella company contractors and the impact that JSL will have on them is decidedly on the collective back burner, unfortunately.

But it's not the only thing we're seeing that's not great.

Will umbrella contractors be auto-transferred under TUPE?

As employees of umbrella companies are forced (if they want to keep their job) into working with a new umbrella-employer that they may not necessarily choose, there is a legal presumption doing the rounds that all workers will be 'TUPE-ed' to the new umbrella.

In reality, this perceived and automatic transfer under the Transfer of Undertaking (Protection of Employment) Regulations 2026 is not, technically, on the cards.

How might JSL indirectly trigger contractors to lose their rights?

As a result, we believe workers/contractors will actually have to start brand new employment, potentially partway through their existing assignment.

Therefore, umbrella contractors risk losing certain employment rights that they had built up with their original umbrella company.

And all of this from a framework that officialdom has cheered for coming to the rescue of contractors!

Will messy HMRC tax codes hit umbrella contractors forced to move under JSL?

But in addition to compulsion and loss of rights, there's more that is leaving a bad taste in the workers who've propped up umbrellas over the years — contractors.

Forced or not, a quick move from one umbrella employer to another could leave the worker with a messy tax code. That's because one payment will follow shortly after the other, with a fair-to-high likelihood that HMRC will end up deeming "joint employment."

What steps should contractors take if they're moving umbrella company due to JSL?

If you're a contractor in this leapfrogging-like situation, then we urge you to ensure that you keep an eye out for the tax code that you end up with, post-leap.

Be aware, the umbrella company can only use the P45 or 'starter checklist details' that they are given, so any changes would need to be handled by you, directly, with HMRC.

For those contractors whose pay is £500-a-day-plus, making them 40% rate taxpayers, if you find yourself on a 'BR' (Basic Rate 20%) code, once you've leapfrogged, then you may end up with a swingeing tax bill at the end of the tax year if you don't act!

What about moving umbrella if I previously opted to accrue holiday pay?

Let's now turn to the instance of contractors leaving their existing umbrella company, and where they had opted to accrue holiday pay from that umbrella that they're leaving.

In this situation, contractors will need to make sure they don't lose that accrued holiday pay.

And further be aware if you're a first-timer, historically, there have been issues with umbrellas and holiday pay, so make sure you request the monies owed before you leave.

Should contractors with JSL queries telephone their new umbrella?

Related, if you're a contractor and are left choosing from a Preferred Supplier List (PSL) that doesn't exactly fill you with confidence, phone the umbrella to try to become confident!

With many of the larger contractor umbrella companies now becoming a very familiar sight on PSLs, make sure you speak with an individual at the brolly. You want to check that you are going to be able to speak with them, or someone else by name, should you have any questions or issues.

Keep in mind, with mass movements of workers triggered by HMRC's JSL rules, customer service is something that is going to be tested, and thrust into the spotlight, at many umbrellas.

How might price-matching claims catch out contractors switching umbrella due to JSL?

Something else we're seeing is 'price matching' claims.

In particular, for some leapfrogging contractors, we're seeing umbrella companies offering to match existing margins during the transfer, but, in the small print, it states that the margin is subject to change.

Therefore, contractors should not only beware the potential devil in the detail, but they should also just explicitly ask for and obtain EVERYTHING they need to know in writing — before agreeing to make that jump.

Do this to avoid a nasty surprise once the 'settling in' period is over.

What if I'm a contractor who's with an accredited or certified provider?

Finally, a bit of reassurance to end on.

For those contractors and those umbrella companies with SafeRec certification and FCSA accreditation, from a financial perspective, there should be no risk, and the same should be the case for recruitment agencies.

Both the FCSA and SafeRec 'badges' signal compliance, and with the latter, the payrolls are also checked in real time, so any potential exposure is technologically limited to a minimum.

What might make an agency/MSP reconsider pushing me to a new umbrella?

Therefore, there's a credible argument which says that if your current umbrella displays both badges, then it places little if any risk on the MSP/agency, and maybe the MSP/agency should reconsider needing to leapfrog the contractor?

The contractor umbrella landscape on April 6th will change, and HMRC says it's for the better.

With contractors potentially facing compulsion, loss of rights and messy tax codes, I think ContractorUK readers will agree with me that the jury is very much still out!

Is HMRC cracking down on umbrella companies?

Away from JSL, we know that the government has fixed its sights on umbrella company regulation.

This regulation is separate from the HMRC crackdown in the shape of JSL.

However, led by the Department for Business and Trade (DBT), the outcome of the "Modernising the Agency Worker Framework" consultation may arrive too late, as the umbrella industry is already starting to be dictated to by a small number of large payroll providers.

Why do umbrella contractors feel forced from frying pan to fire?

For contractors, there's a sense of being forced out of the frying pan and into the fire.

After all, many contractors were first the victim of unconsidered IR35 status decisions, which forced them (in effect) into brollies, and while many contractors weren't happy, they still managed to find companies they could work with to achieve what they needed from a compliant brolly.

How are JSL's unintended consequences hurting contractors?

But now these JSL unintended consequences — a potential loss of rights, plus the prospect of a messy tax code and possibly a hefty tax bill to boot, all while being leapfrogged to a new brolly that they might not even want to be employed by.

Little wonder, then, that the UK is seeing more of its contractors retire. Many are fed up with being tossed from pillar to post, and a fair few others are succumbing to the world of permie-dom.

Final thought before JSL bites…

It seems the already numerous unintended consequences of the JSL legislation for umbrella company contracting may be wider spread than originally thought, and certainly wider spread than HMRC originally thought, because all the current signs are that we may see our valuable contracting workforce slimmed down — an effect not acknowledged in HMRC's Summary of Impacts.