Accountants for Education Recruitment Agencies: 2026 Guide
Running an education recruitment agency comes with a compliance load that most general accountants simply haven’t seen before — VAT on staff placements, umbrella company liability reforms, IR35 status checks, and safeguarding paperwork that has nothing to do with tax at all but everything to do with whether a school will keep using you. This guide from Filing Accounts UK covers what supply teacher and education recruitment agencies genuinely need to know, using only verified facts from HMRC and Companies House guidance.
At Filing Accounts, we work with recruitment agencies placing teachers, teaching assistants, and support staff into schools and academy trusts, helping them stay compliant while keeping their margins intact.
The Umbrella Company Liability Reform You Can’t Afford to Miss
From 6 April 2026, a new Chapter 11 of ITEPA introduces “umbrella company” rules that change who is on the hook for unpaid PAYE and National Insurance when a supply teacher or support worker is engaged through an umbrella company. Where these rules apply, they disapply the existing IR35 / off-payroll working rules for that engagement, and instead make the recruitment agency (or, in some structures, the end client) automatically and jointly liable for the umbrella’s PAYE and NIC debt — regardless of any status determination that was made.
In practice, this means you can no longer treat “we used a compliant umbrella from our approved list” as the end of the conversation. If that umbrella fails to account for PAYE correctly, HMRC can now come to your agency for the shortfall. Reviewing which umbrella companies you work with, and tightening your due diligence before April 2026, is not optional housekeeping — it’s balance sheet risk.
IR35 and the Small Company Exemption
Where placements fall outside the new umbrella rules and the old off-payroll working rules still apply, remember that the obligation to determine status normally sits with the end client — unless that client is a small company. A client counts as small, for these purposes, where it meets at least two of: turnover under £15 million, balance sheet total under £7.5 million, and fewer than 50 employees, applying from the financial year beginning 6 April 2025. Many independent schools and smaller academy trusts fall into this bracket, which shifts the status-determination duty back onto your agency as the fee-payer. Getting this wrong is one of the most common ways recruitment agencies end up with unexpected PAYE liabilities.
VAT: There Is No Recruitment Exemption
A mistake we see often: agencies assuming that because the end client is a school, VAT doesn’t apply. It does. Supplying staff, and charging an introductory or placement fee, are both standard-rated at 20% — there is no VAT exemption for education recruitment, even though education itself can be exempt. This catches out agencies working with academy trusts and independent schools that can’t reclaim VAT, since your fee effectively becomes 20% more expensive to them than it would be to a fully VAT-registered commercial client. Pricing and cash flow planning both need to reflect this properly rather than assuming a blanket exemption that doesn’t exist.
The Compliance Framework: GCA RM6376
From September 2026, academy trusts are required to source supply teachers and education recruitment services through the Crown Commercial Service’s GCA RM6376 framework (Supply Teachers and Education Recruitment). If your agency isn’t an approved supplier on this framework, you risk losing access to a large and growing share of the academy trust market. This is a procurement requirement rather than a tax one, but it directly affects revenue, so it belongs in the same conversation as your financial planning.
DBS Checks: Costs and a Compliance Gap to Know About
DBS checks are a direct, recurring cost of doing business in education recruitment, and they should be built into your pricing model rather than absorbed as an afterthought:
- Basic DBS check — £18
- Standard DBS check — £21.50
- Enhanced DBS check — £49.50, the level required for most roles involving regular contact with children
From January 2026, self-employed workers engaged in regulated activity can apply for an Enhanced DBS check independently, rather than needing an umbrella body to apply on their behalf — useful to know if you place self-employed or umbrella-engaged staff.
There’s also a compliance gap worth flagging to schools you work with: agencies generally cannot run a barred list check on behalf of a school for agency workers in the same way a school can for its own directly employed staff. Being upfront about where this responsibility sits, and documenting how you’ve handled it, protects your agency if a placement is ever questioned.
Key Information Documents and Rolled-Up Holiday Pay
Every work-seeker your agency places must be given a Key Information Document before terms are agreed, setting out pay rates, deductions, and how holiday pay is calculated. For workers on rolled-up holiday pay, the rate is 12.7% of pay, and it must be shown as an amount added on top of their hourly or daily rate, never as a deduction from it. Getting this presentation wrong is a common source of work-seeker complaints and, ultimately, Employment Agency Standards Inspectorate scrutiny — which is a business risk as much as a compliance one.
Structuring Your Agency
Most education recruitment agencies of any real size operate as limited companies, both for the liability protection and because Corporation Tax rates on profits are generally more favourable than higher-rate Income Tax once the business is trading properly. At current rates, Corporation Tax is 19% on profits up to £50,000, tapering through marginal relief to 25% on profits over £250,000. Given the joint liability exposure under the new umbrella rules, keeping clean, well-documented company accounts and a clear audit trail of umbrella due diligence is more important for this sector than for most.
Education Recruitment Compliance at a Glance
| Item | Detail |
|---|---|
| Umbrella company joint liability | From 6 April 2026, agency automatically liable for umbrella’s unpaid PAYE/NIC |
| IR35 small company exemption | Turnover under £15m, balance sheet under £7.5m, fewer than 50 employees |
| VAT on staff placements | 20% standard-rated — no education exemption |
| Academy trust procurement | GCA RM6376 framework required from September 2026 |
| Enhanced DBS check | £49.50 |
| Rolled-up holiday pay | 12.7%, added on top of pay, never deducted |
| Corporation Tax | 19% up to £50,000 profit, tapering to 25% over £250,000 |
Common Mistakes to Avoid
Treating Umbrella Due Diligence as a One-Off Check
Under the new joint liability rules, an umbrella that was compliant last year isn’t guaranteed to be compliant now. This needs to be an ongoing review, not a box ticked once.
Assuming Placements to Schools Are VAT-Exempt
They aren’t. Staff supply and placement fees are standard-rated at 20%, whatever the end client’s own VAT status.
Showing Rolled-Up Holiday Pay as a Deduction
It must be presented as an addition to pay in the Key Information Document, not subtracted from the headline rate.
Ignoring the Small Company Exemption When Placing Into Smaller Trusts
If the end client is small under the statutory test, the status-determination duty falls back on your agency — not the school.
Frequently Asked Questions
Are education recruitment agencies liable for an umbrella company’s unpaid tax?
From 6 April 2026, yes — the new umbrella company rules make the agency automatically and jointly liable for unpaid PAYE and NIC, regardless of any prior status determination.
Do we charge VAT on placing supply teachers into schools?
Yes. Both staff supply and introductory fees are standard-rated at 20%, with no exemption for the education sector.
Who is responsible for IR35 status determinations for our placements?
Normally the end client, but if that client qualifies as a small company under the statutory test, the duty shifts to your agency as fee-payer.
How much does an Enhanced DBS check cost?
£49.50, which is the level typically required for roles involving regular contact with children.
Need an Accountant Who Understands Education Recruitment? Talk to Filing Accounts UK
Between umbrella liability reform, IR35, VAT, and framework procurement, education recruitment agencies carry more compliance risk than most sectors. At Filing Accounts, we help agencies placing teachers and support staff structure their finances correctly and stay ahead of the reforms landing in 2026.
You may also find these related guides helpful: