Contracting in the EU and EFTA: What Compliance Really Means in 2025

From April 2026, new legislation in the UK will make recruitment agencies jointly and severally liable for unpaid taxes if they use non-compliant umbrella companies.

Umbrella Company Reform on the Horizon

This new legislation means that even though umbrellas will continue to receive gross funds from agencies and run payroll under their own PAYE systems, the responsibility doesn’t stop there. Agencies could still face serious financial penalties if their umbrella partners fall short on compliance.

Helping Recruiters and Contractors Stay on Top of the 2025 Compliance Landscape

The Compliance Crunch

Compliance needs to catch up. If you're placing contractors across the EU or EFTA, you need to know:

• Where taxes should be paid

• What counts as misclassification

• When A1 certificates and local registrations apply

It’s easy to get wrong - and expensive if you do.

Contracting in the EU & EFTA: Compliance Rules You Can’t Ignore

Contractors and recruiters play a pivotal role in connecting talent with opportunity — but staying compliant is critical.

Why Compliance Matters and is No Longer Optional

The flexibility of contracting comes with a web of local laws, tax rules, and classification tests.

Get it wrong? Expect audits, fines, and reputational damage.

What You Need to Know

Employee or contractor? Worker classification is under scrutiny.

Each country checks:

• Who controls the work?

• How integrated is the contractor?

• Do they rely on one client?

Misclassified contractors = retroactive taxes + penalties.

A1 Certificates and Social Security

Working cross-border? You need an A1.

If your contractor works in another EU/EFTA country:

• A1 cert proves where social security is paid

• Valid for up to 24 months

• Prevents double payments

Tax Residency & Withholding

Where Are Taxes Paid?

Contractors must prove tax residency.

Clients may need to withhold tax at source.

Local Registration Requirements

Country-Specific Setup Rules

Contractors often need to:

• Register as freelancers or sole traders

• Get VAT numbers

• Comply with invoicing and insurance rules

All countries have unique demands.

Immigration & Right to Work

Don’t go it alone. Recruiters & contractors: stay ahead of the curve.

Partner with experts who understand the nuances of each market. Stay compliant. Protect your reputation. Contact us for tailored advice and solutions to keep you and your organisation fully compliant.