Legal briefing | 25 Sep 2026 |

Supply chains and right to work checks: could your business be fined for failures by subcontractors?

From 1 October 2026, failures by service providers and subcontractors to carry out right to work checks could result in fines being imposed on businesses further up the supply chain. The civil penalties are significant, up to £45,000 per illegal worker for a first breach, rising up to £60,000 for repeat breaches. We look at which contractual arrangements are caught and how businesses can protect themselves against the new extended liability.

What's the trigger for the change?

The changes are being introduced under the Border Security, Asylum and Immigration Act 2025. They form part of a wider package of measures designed to deter irregular migration and tighten up the UK's immigration and asylum system.

What types of contractual arrangement will be caught?

With some exceptions for entities at the very top of supply chains, extended liability is likely to "bite" on most entities within a given supply chain.

An example from the construction sector

A property developer engages a service provider, XCo, to install electrical systems in a new housing estate. The service provider subcontracts certain aspects of that work to Company A, which then in turn further subcontracts specialist elements of that work to Company B.

Some of the workers engaged by Company B do not have the right to work in the UK. At present, only Company B (i.e. the entity that engages the illegal worker) would be liable for a failure to carry out right to work checks. However, from 1 October 2026, the Home Office could also look to impose civil fines on the upstream businesses.

In the above example, this would include XCo, Company A and the property developer (provided that the latter has already contracted with another business which will take over ownership of the housing estate on completion).

Would the property developer in this example always be subject to extended liability?

The property developer would not be caught if it is viewed as purchasing the services “for its own use” -making it in effect the “final customer” for the services at the very top of the chain. Whether a developer setting up systems or infrastructure for a residents' management company would also be caught is less clear and will likely depend on how 'customer' is interpreted under the new framework.

Of course, broadly similar supply chains exist in many other sectors, extending well beyond construction to areas such as property or facilities management, logistics, IT and numerous types of outsourced services where the service provider may look to involve one or more subcontractors.

Does it apply to existing arrangements as well as new ones?

In practice, the new rules are likely to "bite" on many contractual arrangements already in existence at 1 October 2026, where they continue to operate after that date. This is because the trigger for their application is the engagement of new workers on or after 1 October 2026. To use the above example, let's say that on or after 1 October 2026, Company B needs to engage some new workers (perhaps because some of its existing staff have left or it needs to speed up work to meet deadlines). If those new workers turn out to be illegal, extended liability would apply to businesses further up the supply chain - even if Company B's contract with its customer, Company A, was entered into well before the start date for the new rules.

How can businesses protect themselves against extended liability?

Businesses can protect themselves from liability if they impose contractual requirements on subcontractors to carry out right to work checks and, where applicable, have processes in place to prevent substitution of workers by individuals who do not have the right to work in the UK. However, the following points should be noted:

Contract terms: A simple obligation to carry out right to work checks will not be sufficient; the clause will need to meet all the detailed requirements set out in the Home Office's guidance. Among other things, it will need to include audit rights and prevent further subcontracting without consent. And as noted above, existing arrangements which will continue beyond the introduction of the new rules are likely to be caught and will therefore need to be amended.
Practical steps: Just putting in place the required contractual terms is unlikely to be sufficient on its own. For example, let's say that an arrangement has been operating for some years and during that period, no audit has ever been carried out, but if it had been, it would almost certainly have revealed the inadequacy of the subcontractor's right to work checks. In that scenario, the Home Office may be reluctant to accept that a business further up the chain should escape extended liability. Similarly, where a business is able to control access to a construction site, for example, it is likely to be expected to have a system in place to identify whether subcontractor personnel coming onto site are in fact who they claim to be.

Do the new rules apply to any other scenarios, beyond subcontracting?

As explained in our earlier briefing, the extended liability also applies to certain online matching platforms and platforms which allow individuals to substitute another person to work in their place. However, the focus of this briefing is on supply chains, which is where we think the changes are likely to have the most significant impact.

What to do now and how we can help

Map your existing supply chains and work out which ones are potentially in scope.
If you're at the very top of the supply chain, with no immediate customer sitting "above" you, then your business is unlikely to be caught by the extended liability. If you're below this level in the supply chain, however, you will probably need to take action.
Time is short, so identify the arrangements which pose the highest risk – focus on those where subcontractors are smaller and/or are likely to be engaging more significant numbers of staff to provide services.
Amend existing contracts and ensure that new contracts contain the required wording.
Consider what practical steps are appropriate on an ongoing basis e.g. substitution controls, exercise of audit rights etc (see above for examples).

How we can help

We can assist with analysis of supply chains to identify which ones are likely to be within scope of the extended liability provisions and provide you with template wording for existing and future contracts. We can also provide training for procurement, HR and operational teams who will be responsible for managing compliance day to day. Please speak to your usual contact at the firm or any of the contacts listed below.

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