In a significant move to tackle tax non-compliance in labour supply chains, the Government has announced plans to introduce joint and several liability for PAYE income tax and Class 1 National Insurance Contributions (NICs). Set to take effect from 6 April 2026, the proposed legislation aims to ensure that all parties involved in the supply of labour – particularly through umbrella companies – are held accountable for their tax obligations.
This shift is especially relevant for sports organisations that often rely on third-party arrangements to a wide range of support and ancillary staff.
The Government expects to recover £2.85 billion in unpaid tax between 2025-26 and 2029–30, including £75 million in the first year (2025–26), rising to £895 million once the legislation is in full force from April 2026.
A financially significant reform
Labour supply chains, especially those involving umbrella companies, have long posed challenges for HM Revenue and Customs (HMRC). In some cases, unscrupulous umbrella companies have failed to account for PAYE income tax and NICs correctly, resulting in tax losses and leaving workers vulnerable to unexpected liabilities.
To close these gaps and reinforce compliance, the Government is proposing a new legal framework under which recruitment agencies and end clients will share responsibility for ensuring PAYE income tax and NICs are correctly paid.
The sports industry frequently operates through complex employment structures. Clubs may engage staff through umbrella companies or recruitment intermediaries, especially as part of any hospitality events. These chains are susceptible to tax avoidance schemes or errors in tax handling, often leaving individuals and clubs exposed to financial and reputational risks.
Historically, HMRC has struggled to ensure compliance in these types of arrangements, with some umbrella companies failing to correctly account for PAYE and NICs. The new rules aim to close those gaps.
Key changes of the proposed framework: what sports organisations need to know
Joint and Several Liability Introduced
From April 2026:
Recruitment agencies, often used by clubs or sponsors to source talent and event staff, will be held jointly and severally liable for any unpaid PAYE and NICs made via umbrella companies. If no agency is in place, for example, where a sports club contracts a coaching team directly through an umbrella company, the club (end client) will bear full liability for any unpaid taxes. This applies regardless of whether the individual is a freelance physiotherapist, hospitality staff, or youth development coach engaged via an intermediary.
Purported Umbrella Companies: A new compliance priority for 2026
A pivotal change in the upcoming April 2026 tax legislation is addressing “purported umbrella companies”. This new legal concept is designed to address a growing area of concern: entities that present themselves as compliant umbrella companies but are, in fact, operating to deliberately avoid their employment tax obligations. Such arrangements typically involve misclassifying workers or rerouting payments in a way that evades PAYE income tax and NICs.
In the context of sport, this could impact arrangements involving short-term contract staff for events, hospitality and other occasions which require additional, often short-term staffing . If HMRC finds that an umbrella company isn’t acting as a true employer, i.e. not deducting PAYE, the tax liability will shift to the agency or club, even if they were unaware of the non-compliance.
Strengthened compliance obligations across the sporting supply chain
The proposal mandates enhanced due diligence throughout the labour supply chain. To reduce exposure, clubs, governing bodies, and sports agencies must now take proactive compliance measures to manage risks associated with third-party labour intermediaries, including:
- Thorough vetting of labour supply intermediaries, especially those supplying freelance staff or contracted athletes.
- Contractual safeguards with clear tax responsibility clauses.
- Ongoing monitoring of third-party compliance, including regular checks on payroll and RTI submissions.
HMRC’s enforcement powers expanded
The joint and several liability model strengthens HMRC’s enforcement powers, enabling it to recover unpaid liabilities from any responsible party in the sports labour supply chain, including event organisers, club sponsors, and staffing agencies. This significantly reduces the risk of revenue loss to the Exchequer and accelerates enforcement action. The move mirrors the Off-Payroll Working Rules (IR35), which previously impacted Personal Service Companies (PSCs), which is common in sport for individual athletes and coaches.
The Government has confirmed that genuine PSCs, such as those used by elite athletes with formal contracts, will not be caught by these new rules unless structured to evade employment taxes.
Strategic objectives of the reform
The proposed changes are part of a wider government strategy to improve transparency and fairness in the labour market. Specifically, they are designed to:
- Combat deliberate tax fraud in recruitment and engagement structures and reduce revenue loss by holding accountable those who enable non-compliance.
- Protect sports professionals from unexpected tax bills due to non-compliant intermediaries.
- Create a level playing field for compliant sports clubs and service providers.
What This Means for the Sports Industry
The proposed changes are likely to have a wide-reaching impact on how the sprots industry engages with umbrella companies and manage their labour supply chains:
For clubs and governing bodies:
- Review and audit current use of umbrella companies for scouting, medical, coaching, and administrative roles.
- Reassess overseas recruitment pipelines, especially where payment structures are complex.
- Consider bringing more roles in-house to retain control over PAYE and NIC obligations.
For sports agents and intermediaries:
- Be aware that engaging staff through non-compliant umbrellas could transfer liability to you.
- Establish due diligence processes for recruitment agencies and third-party payroll providers.
For Umbrella Companies:
- Full transparency and compliance will be essential to retain clients in the increasingly risk-averse sports sector.
- Be prepared to provide documented evidence of PAYE operations, such as RTI submissions and worker payslips.
Recommended Preparatory Actions
Although the implementation date may appear distant, businesses are strongly encouraged to begin preparations now to mitigate future compliance risks. Suggested preparatory steps include:
Conduct a Comprehensive Supply Chain Audit
- Identify all instances where umbrella companies are used within the organisation’s labour supply.
- Develop stringent due diligence criteria for engaging compliant umbrella companies.
- Assign clear responsibility for managing and reviewing these relationships.
Coordinate Cross-Functional Alignment
- Ensure that HR, procurement, finance, and legal functions are aligned and fully apprised of their respective obligations under the new framework.
- Promote organisation-wide awareness of compliance requirements.
- Train relevant stakeholders, if applicable.
Strengthen Record-Keeping Protocols
- Maintain accurate and detailed documentation regarding all labour supply arrangements, contractual terms, and payroll operations.
- Well-maintained records will be essential in demonstrating compliance during HMRC reviews.
Seek Formal Assurance from Umbrella Companies
- Request written confirmation that umbrella companies are operating PAYE appropriately for all workers.
- Obtain corroborating evidence, such as Real Time Information (RTI) submissions, payslips, or payment schedules.
Conclusion
This proposed reform signals a decisive shift in how tax compliance is managed in modern labour markets including those that underpin professional and grassroots sport. By introducing joint and several liability, the Government aims to restore fairness, protect workers, and ensure all parties in the supply chain uphold their tax obligations. Businesses that take early steps to strengthen their compliance practices will be best positioned to navigate this evolving regulatory landscape.
Taking action now will allow clubs, intermediaries, and governing bodies to operate confidently and compliantly under the new framework.
Contact Us
To understand how these changes may impact your organisation, or to receive tailored compliance support, please contact a member of our Employment Taxes team.
