IR35 Reform 2024–2026: Why Recruitment Companies Are Back in the Driving Seat

Over the past few years, IR35 (Off-Payroll Working) has fundamentally reshaped how contractors are engaged across the UK. For recruitment companies, it has often meant navigating risk-heavy decisions, cautious clients, and reduced flexibility.

But two major developments are now changing that narrative:

• The April 2024 HMRC offset reform, introduced by HM Revenue & Customs

• The April 2026 updates to Joint and Several Liability (JSL)

Taken together, these changes don’t just reduce risk—they redefine where responsibility and control sit within the supply chain.

And for recruitment companies, that’s a significant opportunity.

A Quick Recap: The 2024 Offset Reform

The 2024 reform addressed one of the biggest concerns in IR35 enforcement: double taxation.

Previously, if an IR35 determination was challenged, the deemed employer could be liable for the full PAYE bill—even if the contractor had already paid tax through their Personal Service Company (PSC).

Now, HMRC allows:

• Income tax

• Employee NICs

• Corporation tax

…already paid by the contractor to be offset against that liability.

The Impact: A substantial reduction in financial exposure for agencies and end clients.

April 2026: The JSL Shift

The April 2026 changes to Joint and Several Liability (JSL) go a step further—by reshaping who ultimately carries the risk when things go wrong.

In practice, these changes:

• Increase focus on compliance within the labour supply chain

• Make it more likely that liability sits with the party closest to the engagement and payment structure

• Reinforce accountability where there is real operational control and visibility

For many recruitment companies, this effectively means stepping into a more central, accountable role in IR35 compliance.

Why This Is Positive for Recruitment Companies

At first glance, “more liability” might not sound like good news.

But in reality, this shift aligns responsibility with where the knowledge and influence already sit.

1. Control and Visibility Are Finally Aligned

Recruitment companies typically have:

• Direct relationships with contractors

• Detailed visibility of contract terms

• Insight into working practices (often more than the end client)

By placing greater responsibility at this level, the rules now better reflect how the market actually operates.

In short: Those best placed to assess IR35 status are now empowered to take the lead.

2. Moving Away from Blanket Bans

One of the biggest challenges since the 2021 reforms has been the rise of risk-averse blanket decisions from end clients:

• “No PSCs” policies

• All roles deemed inside IR35

• Reduced contractor engagement

  
  

These decisions were often driven by fear of unknown risk.

With:

• The 2024 offset reducing financial exposure, and

• The 2026 JSL changes clarifying responsibility,

…there’s a clear opportunity to move toward more nuanced, role-specific assessments.

Recruitment companies can now:

• Work more closely with clients to review roles properly

• Provide evidence-based IR35 determinations

• Reintroduce genuine outside-IR35 opportunities where appropriate

3. A Stronger Strategic Role for Recruiters

These changes elevate the role of recruitment companies from intermediaries to trusted compliance partners.

Instead of simply relaying client decisions, agencies can:

• Lead IR35 discussions with confidence

• Offer structured assessment processes

• Help clients balance compliance with access to talent

This is a clear opportunity to differentiate through expertise, not just delivery.

4. A More Balanced Risk Profile

Yes, agencies may carry more defined responsibility under JSL—but that risk is now:

• More transparent

• More controllable

• Better aligned with the information available

Combined with the offset mechanism, the overall position is far more balanced than in previous years.

What This Means for the Contractor Market

Together, these reforms could help unlock a more functional and flexible contractor ecosystem:

• Clients regain confidence to engage contractors

• Agencies take a leading role in compliance and structuring

• Contractors see a return of fair, outside-IR35 opportunities

It’s a shift away from defensive hiring—and toward informed, collaborative decision-making.

Final Thought

The IR35 landscape isn’t getting simpler—but it is getting fairer and more aligned with reality.

The combination of the 2024 offset reform and the 2026 JSL changes puts recruitment companies firmly back in the driving seat.

With greater control comes greater responsibility—but also greater opportunity.

Agencies that embrace this shift—investing in compliance, understanding contracts in detail, and working closely with clients—will be best positioned to:

• Reduce risk

• Add real strategic value

• And unlock a more flexible, competitive contractor market

Want to discuss how these changes impact your hiring strategy?

We’re already supporting clients and contractors through this transition—feel free to get in touch.