The introduction of joint and several liability (JSL) for umbrella company labour supply chains from April 2026 has significantly heightened tax and NICs risk for agencies and, in some cases, end clients. Where contractors had been pushed to work through umbrella companies to remove the IR35 issue, agencies and end clients will be rethinking the use of umbrellas. Against this backdrop, the IR35 offset provisions introduced in April 2024 take on renewed importance within off‑payroll working, making contracting directly with a contractor's PSC a less risky prospect than engaging the contractor through an umbrella. The JSL rules affecting umbrella company arrangements from April 2026 were covered in our recent blog.

The statutory offset allows HMRC to credit certain taxes, including income tax, corporation tax and certain NICs already paid by limited company contractors or their intermediaries against liabilities assessed on engagers following an IR35 status re‑determination. While the rules do not extend to employer NICs, they go some way towards addressing the inequity of double taxation that has concerned businesses since the IR35 reforms were expanded. 

Contractual drafting remains critical. Parties engaging limited company contractors will want to ensure clear contractual risk allocation, including express provisions acknowledging the availability of the offset, requiring information sharing and cooperation from the limited company contractor to support HMRC’s verification process to be able to access the offset, restricting conduct that could prejudice offset eligibility, and aligning contractual remedies with IR35 status dispute processes.