PAYE responsibility in the labour supply chain from April 2026: what agencies need to evidence

Somebody asks you to demonstrate that PAYE and National Insurance were correctly operated on a worker you placed in May, through a payroll provider you have used for four years, on a contract signed in 2023.

You can produce the placement record and the invoice. Can you produce the deduction? The RTI submission? Evidence that the money reached HMRC rather than merely leaving your worker's gross pay?

For most agencies the honest answer in April was no, and for a fair number it is still no in September. That gap is what the change is about.

What changed#

The April 2026 change concerns umbrella-engaged (provider-employed) workers. From 6 April 2026, responsibility for operating PAYE and National Insurance on the pay of workers employed by a third-party payroll provider in the supply chain sits with the recruitment agency that supplies the worker to the end client — or with the end client itself where there is no agency in the chain. It was delivered through amendments to the Income Tax (Earnings and Pensions) Act 2003.

Two points about its shape, because both are widely misread.

It moved responsibility; it did not create a joint arrangement. The legal accountability for correct deduction and payment previously sat with the provider employing the worker. It now sits with the party best placed to police the chain. The provider can and usually does continue to run the payroll operationally. The statutory duty is yours.

It is not a verdict on any payroll model. Nothing in the legislation says you should change route, and nothing in it should be read as a judgement on provider-employed PAYE, which remains a legitimate and widely used arrangement that suits a great many workers — particularly those holding several bookings at once. What changed is who answers for the numbers, not which numbers are acceptable.

Why this is a records exercise, not a restructuring exercise#

The temptation, and there is no shortage of people in the market encouraging it, is to treat April 2026 as a reason to rip out a payroll model. That is an expensive answer to a question nobody asked.

Responsibility for correct PAYE operation is not route-specific in practice. If you cannot evidence deductions on your provider-employed workers, you probably cannot evidence them on your bureau workers or your CIS subcontractors either, and moving workers between routes carries the gap along with them. The work that actually discharges the duty is the same work in every case: know who is in your chain, hold the evidence, and put the contractual position in writing.

Do that, and you can run whichever routes suit your book. Skip it, and no restructuring saves you.

What to hold on file#

Per provider, reviewed at least annually:

• Accreditation certificate and expiry date. FCSA accreditation is a credible baseline. It is a baseline. HMRC will not treat it as a substitute for your own due diligence, and the whole point of the reform is that you are now the party expected to have looked.
• Company details verified against Companies House — incorporation, directors, filing history. Read the filing history, not just the name.
• PAYE reference, and confirmation of which entity in a group actually operates the payroll. A provider trading under one brand and paying under a different reference is not a problem in itself, but you need to know.
• The fee, expressed in pounds per week or per month, not as a percentage of rate.
• A worked example payslip for a representative assignment rate, showing the build-up from assignment rate to gross pay to net, with employer costs identified line by line.
• The indemnity clause in your contract with them, and a note of who signed it and when.

Per pay period, per worker:

• Payroll reports that reconcile to your placement records and timesheets.
• Evidence of RTI submissions made in respect of your workers.
• Evidence that payments reached HMRC — not the same thing as evidence of a submission.
• A payslip trail you could hand to a worker who disputes their pay, without having to ask the provider first.

Contractually:

• Terms that state where statutory responsibility sits and what the provider warrants.
• Indemnities that actually reach the exposure, from a counterparty with the standing to honour them. An indemnity from a company with no assets is a sentence, not a protection.
• A right to audit, and a defined turnaround for evidence requests. "Within five working days" is a clause; "on request" is not.
• Notice provisions that let you exit a provider without stranding workers mid-assignment.

Internally:

• A supply chain map. One page: every provider, every worker, every route. Most agencies do not have this and are surprised by their own answer when they build it.
• A named owner for provider due diligence, with the review in a calendar rather than in someone's intentions.
• A brief for finance and operations on the cash-flow and systems consequences.

Route selection is a separate exercise, covered in Every payroll option, assessed and matched: choosing payroll routes for a contract book. Workers placed outside the UK are a different question, under different legislation, and UK payroll is usually the wrong instrument — see Ireland and Europe.

What this is not#

It is not a reason to frighten clients into a call, and it is not a reason to tell workers their arrangement is unsafe. The large majority of arrangements in the market are compliant, and a worker whose pay is correctly operated is unaffected by any of this.

Nor is it urgent in the way some of the market has been implying. The date has passed. If you hold a supply chain map, a provider file and contracts that reflect the position, you are done. If you hold none of those, the work is a fortnight of somebody's attention, not a crisis.

Where it is genuinely difficult: agencies carrying acquired desks and inherited providers nobody has documented, and agencies whose provider will not supply evidence within a reasonable window. The second is the real signal. A provider that cannot show you what it deducted is telling you something.

How Freelancer Supermarket helps#

We are an independent consultancy and an introducer. We are not the paying entity, we do not run your payroll, and we are not a compliance auditor.

What we do is the assessment and the introduction. We look at the routes running across your book, the providers in your chain and what your clients and frameworks require; we set out the options that genuinely fit side by side; and where a provider is not standing up to scrutiny we introduce you to two or three from a panel we have checked, with a reason attached to each name.

We are paid by whichever partner you engage, and the same amount either way. So we have no product to defend and no route to push — there is no commercial reason for us to move you off an arrangement or onto one. If your existing panel is sound and your records are in order, we will tell you so, and there is no fee riding on that answer. Regulated tax and legal advice on your specific position comes from the regulated partner you engage, not from us.

If the gap is reconciliation and evidence rather than provider choice, that is back office.