A government crackdown on labour supply chains will shift responsibility for Pay As You Earn payments and National Insurance contributions from umbrella companies to recruitment agencies and end clients. 

HMRC analysis suggests that 39% of workers in 2022-23 were paid through non-compliant umbrella companies, leading to annual losses of £500 million for taxpayers. It defines umbrella companies as employment intermediaries that employ workers on behalf of agencies and end clients. 

To close the loophole, HMRC is moving the responsibility to account for PAYE and NICs from the umbrella company that employs the operative to the recruitment agency that supplies the operative to the end client. If there is no agency, the responsibility will sit with the end client. 

The new measure takes effect from April and is expected to raise £2.8 billion for the exchequer by 2029-30. 

Watch MD Ian Anfield explain how the new law will pass tax liabilities onto construction firms that rely on skilled freelancers

Hudson’s managing director Ian Anfield said: “This is a major change that could directly impact how housebuilders and property developers engage freelancers such as:

“Many of these firms depend on skilled professionals and shifted them onto PAYE or umbrella schemes to comply with IR35 off-payroll working rules, often facing resistance from the individuals. As a result, companies have struggled to attract freelancers because of their in-house compliance measures and are looking for a tried-and-tested, risk-free solution that tackles these issues.” 

Launched in 2016, Hudson Freelance helps firms navigate this increasingly complex regulatory environment. It is a sister company to Hudson Contract, which has nearly three decades of experience and expertise in HMRC compliance in construction. To help firms prepare for the new measure, Hudson Freelance is offering a free, no-obligation assessment of their current arrangements. 

If an initial conversation is of interest, please call the office on 0800 054 1127 or email manchester-team@hudsoncontract.co.uk