JSL and Digital Readiness: The 2026 Compliance Challenge HR and Payroll Can't Ignore

By Varun Monteiro, CEO of Finity

January 28 2026 - In April 2026, HMRC will introduce Joint and Several Liability (JSL), a major change that will reshape the HR and payroll landscape. For the first time, liability will extend across the entire supply chain, with employment agencies and their end clients held jointly responsible for unpaid payroll taxes when working with non-compliant umbrella companies.

While the aims of the policy are clear and positive - protect workers, close the tax gap, and prevent fraudulent operators from undercutting legitimate businesses - attention must now turn to digital readiness - the sector's biggest concern. Put simply, if HMRC's digital infrastructure isn't ready in time, even compliant businesses could face bottlenecks, errors or penalties.

With this in mind, I recently sat down with Kevin Hart from BASDA - an organisation that represents the UK software sector - to discuss these challenges and how we can collaboratively address them. Crucially, Kevin's close relationship with HMRC helps ensure these industry conversations and concerns are shared where it matters most.

This article will explore what comes next as we journey towards the April 2026 roll out.

From policy to practice: What JSL really means for HR and payroll

The introduction of JSL marks one of the most significant shifts in workforce taxation and compliance in more than a decade. For HR and payroll teams, the implications go far beyond process updates or new documentation requirements. JSL is set to reshape the entire risk profile of the labour supply chain, placing new expectations on employers, agencies and payroll providers alike.

At its core, JSL extends liability for unpaid taxes across every party in the chain. This means that if something goes wrong upstream, whether through error, poor processes, or deliberate non-compliance, compliant businesses can be held responsible.

This is why digital readiness now sits at the heart of the industry's concerns. Under JSL, payroll teams need real-time, reliable visibility of supplier behaviour, and the ability to verify tax data quickly and securely. The industry's manual processes simply cannot support this at scale.

The digital readiness gap: Why manual processes can't support JSL

Our recent research underscored the challenge and exposed a core problem: no real-time access to HMRC tax data - a gap that leaves businesses vulnerable to compliance failures, fraud and reputational damage. Our survey found that:

• 79% of recruitment and payroll businesses want HMRC to modernise and integrate its systems.
• 75% expect to need new technology to manage compliance and real-time audits under JSL.

For employers and payroll teams, JSL elevates supply chain transparency from best practice to necessity, requiring a shift away from retrospective checks and paper trails, towards continuous verification, integrated data, and defensible audit evidence.

The path forward: Compliance at source through API-driven verification

When JSL was first announced, we published a whitepaper on the technological changes HMRC must deliver to enable successful implementation. In this report, we didn't just diagnose problems, we prescribed a solution, outlining three practical APIs which provide an efficient starting point.

• Employer Liability Verification API - enabling secure, real-time verification of supplier tax liabilities (PAYE, CIS, VAT) without exposing sensitive data
• Payslip Verification API - confirming contractor payments match HMRC's official FPS records, ensuring each worker is correctly reported and visible to HMRC
• Extension of HMRC's existing RTI platform - enhancing current infrastructure with APIs rather than requiring a costly and disruptive full system overhaul

Recognising that without digital modernisation, the new JSL rules risk increasing complexity and administrative burden rather than solving non-compliance, our whitepaper called for compliance at source, embedding verification into the transaction flow so compliance becomes a by-product of doing business rather than a separate manual process.

Kevin Hart was able to leverage this report directly with HMRC, which subsequently appointed a senior person to take forward our recommendations.

Progress is already being made, with a Senior Software Strategy & Policy Advisor at HMRC reaching out to the industry in October to gather insight on API requirements.

This represents a major step forward and makes the path to implementation look more manageable than it did a few months ago.

The remaining risks: Timelines, technical specs and sector impact

While the timeline to April 2026 is achievable, assuming regulations and technical details are published on schedule, challenges remain. The legislation is still in draft form, and supporting details often reveal unexpected complications.

As with many things, the devil is in the detail. And it must be recognised that many organisations will wait for HMRC's digital framework before making technology investments.

A new model for compliance: Why collaboration must lead the way

A key takeaway from journey to JSL implementation is how government-industry collaboration should be shaped in the future.

Kevin's message to HMRC is clear: "Please share with us your pain points, not just your planned changes."

Effective policy implementation requires understanding of constraints early in the process, and this can only be achieved if trust and collaboration exist between policymakers and industry.

What happens next: Building a digitally ready compliance ecosystem

To ensure compliance at scale, businesses urgently need AI-driven insights, API integrations, and automated real-time auditing capabilities.

Our vision is for a tax environment that is not just compliant, but also more transparent, efficient and resilient, where API-first infrastructure builds transparency and trust, real-time, automated auditing becomes integrated into payroll systems, and AI-driven anomaly detection helps identify compliance risks early.

If HMRC delivers on the calls for digital modernisation, the April 2026 reforms could mark a significant turning point. Ultimately, digital readiness = compliance readiness, and the success of JSL depends on coordinated action between software providers, employers and regulators.

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