As the UK looks ahead to the 2026/2027 tax year, many businesses and contractors are reassessing how contract labour is engaged.
While the IR35 rules themselves are not changing, new compliance measures coming into force for umbrella companies in April 2026 could reshape behaviour across the contractor market in a way that favours well-structured outside IR35 arrangements.
The changes centre on new Joint and Several Liability rules introduced by the Government as part of its wider crackdown on non-compliance within umbrella company supply chains.
The intention is to ensure the correct Pay-As-You-Earn (PAYE) and National Insurance Contributions (NICs) are paid to HMRC.
The impact, however, could be far more far-reaching for contractors looking to work outside of IR35.
Why umbrella risk may drive change
From 6 April 2026, unpaid or incorrectly calculated PAYE and NIC relating to umbrella workers can be transferred up the supply chain.
Liability will first fall to recruitment agencies and, if necessary, to end clients. Crucially, there is no statutory defence.
Even where thorough due diligence has been carried out, businesses may still be exposed.
For many organisations, this introduces a level of financial and reputational risk that will be difficult to ignore.
As a result, many businesses are already reviewing their relationships with umbrella companies to see if there is a better way to acquire the talent they require.
This review should result in genuine outside IR35 engagements coming back into vogue as businesses attempt to derisk their operations.
When contracts are correctly structured and genuinely sit outside IR35 and work is delivered via a Personal Service Company (PSC), the umbrella model and consequent risk is removed altogether.
We expect more businesses to explore Statement of Work arrangements, project-based delivery and clearly defined work packages.
These models not only align with outside IR35 principles but also offer greater clarity around outcomes, costs and accountability.
What this means for contractors and businesses
Rather than reducing contractor use, many organisations are likely to become more selective and more deliberate in how they engage.
This creates an opportunity for contractors who operate compliantly and for businesses willing to structure engagements properly.
At Cogent, we see this as a positive shift. With the right advice and planning, contracts outside of the IR35 rules may become a more attractive and sustainable option for both contractors and the clients who engage them.
The key will be getting the structure right from the outset and understanding where risk truly sits.