THIS ARTICLE HAS BEEN UPDATED ON 26 NOVEMBER 2025
An umbrella company’s administration highlights the major risks that can be inherent in the recruitment supply chain when it comes to payroll credit facilities and upcoming PAYE tax liability laws
Umbrella firm’s £2.5 million tax bill uncovered
As reported by The Freelance Informer on 18 November, the umbrella company, Honest Payroll Limited, has gone into administration. Companies House formally notified the public of the administration on September 26, 2025. This was just one week after the company entered administration on September 19, 2025. It was first reported that Honest’s SafeRec-accreditation was removed on October 9, however, SafeRec has since confirmed with The Freelance Informer that categorically the certification was automatically removed on 19 September.
Administrators had received a claim from HMRC totalling nearly £2.5 million. Most of this amount, just over £2.3 million, is related to unpaid Value Added Tax (VAT). There is also an additional £152,500 in respect of VAT penalties and interest. It was also initially reported, as per Companies House records published on 11 November, that HMRC was also owed £62,648.76 in Pay As You Earn (PAYE) tax.
The Freelance Informer was informed in a SafeRec statement on 24 November 2025 that this PAYE tax liability has been paid, leaving no risk to associated recruitment agencies.
The Freelance Informer has also received an HMRC account statement showing there are no PAYE liabilities in this matter. The publication also received written confirmation from Honest Payroll’s administrators that HMRC’s claim of £62,648.76 in respect of PAYE has been received following the firm’s appointment. The administrator said in writing that a claim was subsequently received from HMRC, which related solely to VAT and confirmed that no PAYE was unpaid/outstanding.
Following the Administrator’s appointment, we took
remediation steps and immediately instructed that this outstanding employment tax
amount be settled by the associated entity using their previous PAYE reference
number. This payment was promptly made to HMRC and we then verified the HMRC
Tax account of Honest Payroll Limited to confirm all PAYE taxes were settled.In due course, the Statement of Affairs will be updated to reflect that the PAYE liabilities
have been cleared and that no amount for PAYE is outstanding.Consequently, no value would have fallen into JSL post-April contrary to the article’s claims. This action allows us to submit our final monthly compliance report to all recruitment agencies working with Honest Payroll, confirming that all employment taxes were accurately calculated, disclosed to HMRC, and paid to HMRC.
-SafeRec statement
Debt exposure and client failure to pay
Companies House records also reveal how the umbrella company found itself in trouble. Honest Payroll accumulated a large debt from a client under credit terms. However, this client has now failed to pay the amount and is actively disputing it. This failure to secure payment appears to have been a significant factor in the company’s ultimate demise.
Risk of “easy credit”
In a SafeRec article, published on 23 November, the SaaS umbrella certification company said, “Any organisation, whether an Agency or an Umbrella, that offers credit terms too easily should be viewed with caution. If you see an Umbrella Company publicly promoting funding or easy credit on social media, you should treat that as a clear red flag and start asking very hard questions about how that funding is being sustained.”
When an End Client, or Agency disappears or refuses to pay, it puts stress on the organisation fronting the money, forcing them into administration in the most extreme cases.
This is not just an “Umbrella problem.” It is a temporary labour supply chain problem. Unless workers agree to wait up to 60 days for their pay (which would be really unfair), this risk will always sit with one party in the chain.
–SafeRec
In September of this year, when Honest Payroll Ltd went into administration following an agency default on payments, the umbrella company still owed £62,648.76 in PAYE and National Insurance Contributions, which was the amount owed for the month of September. The Freelance Informer has been told.
Here is exactly what SafeRec did as per its statement:
Following the Administrator’s appointment, we immediately requested that the outstanding employment tax amount be settled by an associated entity using the original PAYE reference number.
We verified the payment directly via Honest Payroll’s HMRC Tax Account, ensuring that all employment taxes have been paid.
Because of this forensic access, we are able to issue a final compliance report to every recruitment agency working with Honest Payroll confirming that all employment taxes were accurately calculated, disclosed to HMRC, and paid to HMRC.
SafeRec stated in an article published on its site on 23 November that umbrella companies often face an “unfair stigma”, portrayed as organisations “lacking a moral compass.” The article said:
However, this [Honest Payroll Ltd.] case study reminds us that they are businesses subject to the same commercial pressures as any other sector. The true measure of an Umbrella is not just how they operate, but how they handle adversity. What matters is doing the right thing and ensuring that their workers’ employment taxes are paid, which is exactly what Honest Payroll did, despite one of their agencies defaulting and putting them in an extreme position.
According to Companies House, Matthew Reginald Blane is the sole director of the Honest Payroll Group of companies, including its still active sole trader and small business accounting startup Honest Accounting.
Warning on tax checks
The collapse of the umbrella in the initial news report was highlighted by Crawford Temple, CEO of Professional Passport, as a warning to the recruitment and umbrella sector. In a press statement, he stressed the dangers of checking compliance after the fact. He warned that this offers no real protection once new tax liability rules begin next year.
The legislation, called Joint and Several Liability (JSL), is expected to come into effect from April 2026. From that date onwards, liabilities will transfer up the supply chain. For example, if an umbrella firm collapses, the recruitment agency may be forced to pay all unpaid PAYE employee tax. This is despite the agency already having paid the umbrella’s original invoices.
However, as per Chapter 11 ITEPA, SafeRec has highlighted in its statement that unpaid VAT liabilities will not become liable to the linked recruitment agencies:
This liability (JSL), alongside other legislation such as the onshore and offshore intermediary rules implemented since 2014, applies specifically to the employment taxes of the worker: Income Tax, Employee NI contributions and Employer NI contributions. It does not pertain to other liabilities the umbrella may have. The tax liability that comes with JSL concerns exclusively the employment tax that Umbrella Companies must pay when they employ a worker on behalf of the recruitment agency.
In the case of Honest Payroll, SafeRec said,
We must strongly refute the implication that had this event occurred post-April 2026, recruitment agencies would have faced “significant financial exposure”. Agencies and MSPs would be perfectly safe. They would have received the verified monthly compliance report confirming employment taxes have been accurately calculated, disclosed to HMRC, and paid.
Dave Chaplin, CEO of ContractorCalculator, suggested that checks made after the event are useless. He compared the situation to checking a car after it has crashed, stating it is impossible to “uncrash” it.
Chaplin noted that the payslip-checking software could not predict the firm’s collapse. He also questioned why the large VAT funds were not set aside for tax purposes: “Honest Payroll extended £1.5 million in credit terms and was never paid. They either needed a stronger balance sheet or credit-terms insurance to protect the lending they provided.”
SafeRec cannot be held responsible for the umbrella company being left with £1.5 million in unpaid fees, and their payslip-checking software was never designed to detect such an issue. Payslip checking tools cannot predict future events, as no one has a crystal ball.
–Dave Chaplin, CEO ContractorCalculator
Real-time data
SafeRec will soon launch a live integration with CreditSafe. According to SafeRec’s website, this service will allow any agency and partners to monitor the financial pulse of its Certified Partners in “real-time, directly from the SafeRec platform, flagging liquidity issues before they become administration headlines.”