What letting agents and inventory suppliers need to know

From 1 October 2026, the UK's right to work framework will change significantly. Introduced under the Border Security, Asylum and Immigration Act 2025, the updated rules extend civil penalty liability well beyond traditional employment relationships. Businesses involved in labour supply chains, subcontracting arrangements, and certain online matching platforms will now need to consider whether they have obligations they did not previously hold and whether their existing processes are adequate to meet them.

The potential penalties are substantial. Businesses found to have engaged individuals without the right to work in the UK can face civil penalties of up to £60,000 per illegal worker. Critically, this liability can now arise even where the individual is not your direct employee.

Under the new framework, businesses may be affected if you:

• Enter into contracts to supply workers or services to a third party and subcontract some or all of that work to another company or individual

• Operate an online platform that matches service providers with clients

• Engage individuals under arrangements that allow them to send a substitute to carry out the work in their place

In those circumstances, responsibility for carrying out right to work checks on the individual personally performing the service may fall on you, regardless of whether you employed them directly.

It is worth noting what the rules do not capture. If you are simply purchasing services for its own use, for example, commissioning a repair, engaging a consultant, or booking a cleaner for your own premises, you are likely acting as an end-user and the new obligations should not apply to you. Liability is most relevant where a business sits within a supply chain or contractual arrangement through which services are passed on to a third party.

Genuinely independent self-employed professionals who contract directly with their own clients, without any supply chain, platform, or intermediary involvement, are generally outside the scope of the new regime, provided the arrangement is correctly classified and is truly arm's-length in nature. A business that simply purchases services from such a provider does not, by virtue of that transaction alone, become liable under the extended regime.

This distinction matters particularly in the property sector, where working relationships between agents and suppliers have often developed informally over time. The two scenarios below explore what that means in practice.

Scenario 1: The Letting Agent

A letting agent has worked with the same inventory clerk for years. She operates as a sole trader. Jobs are booked by email, reports come back on time, and it has never occurred to either party that a formal contract was necessary.

One day she is unavailable and sends a colleague to carry out a check-out instead. The report is completed and nobody thinks anything more of it.

Months later, the agent starts reviewing supplier arrangements ahead of October. There is no written agreement. No record of who attended or under what authority. No documentation of whether substitution was permitted or where responsibility sat.

What could go wrong?

On its own, engaging a genuine sole trader who contracts directly with the agent should fall outside the new regime. But the moment a substitute attended that property, the arrangement stopped looking like a straightforward sole trader relationship and the agent has nothing to show how it was structured or what was agreed.

Without documentation, the agent cannot easily demonstrate that the original arrangement was correctly classified, that substitution was permitted, or that compliance responsibility was considered at any point.

Why it matters under the new Right to Work framework

The new rules apply where individuals are engaged under arrangements that allow them to send a substitute to carry out the work. That is precisely what happened here.

The classification of a working arrangement is assessed on its actual characteristics. An informal relationship that has always been treated as sole trader self-employment may not withstand scrutiny if the reality looks different and without paperwork, it is hard to argue either way.

Practical steps to reduce the risk

• Put a written agreement in place with each supplier, even long-standing ones

• Address substitution explicitly an if it is permitted, document it and confirm who holds compliance responsibility in relation to anyone attending in place of the named individual

• Do not rely on how an arrangement has always been described. You should consider whether it would withstand scrutiny based on how it actually operates

• Review supplier relationships ahead of October, particularly where things have evolved informally over time

Key takeaway

Engaging a genuine sole trader may place you outside the new regime. But "genuine" is doing a lot of work in that sentence. Without written agreements that reflect the actual nature of the arrangement, it is very difficult to demonstrate that the exemption applies, particularly where substitution has occurred.

Scenario 2: The Inventory Supplier

An inventory business starts as a sole trader. One person, working directly with a handful of agents. Straightforward, and outside the scope of the new obligations.

Over time the business grows. Associates are brought in to help. Jobs are reassigned around holidays and sickness. Different clerks attend different properties. Agents are happy as they just want a quality report and are not concerned about who attends.

But the business that started as a sole trader now operates quite differently. It is contracting with agents to provide services and fulfilling those contracts through other individuals. The exemption it relied on at the outset no longer applies and the processes have never been updated to reflect that.

What could go wrong?

There is no formal onboarding process for associates. Records of who attended which property are inconsistent. Agreements with clients and associates are largely informal. Compliance responsibility has never been explicitly allocated.

The business did not set out to ignore its obligations. It simply never noticed that they had started to apply.

Why it matters under the new Right to Work framework

The sole trader exemption is real, but it is also narrow. Once a business begins using associates or subcontractors to fulfil instructions, it is likely operating within the scope of the new rules, regardless of how it started out or how it describes itself.

The transition is easy to miss precisely because it happens gradually. The question is not whether you were a sole trader when you began. It is whether your current arrangements still reflect that, and whether your processes have kept pace with how the business actually operates.

Practical steps to reduce the risk

• Formalise agreements with letting agent clients, covering service standards, substitution arrangements, and compliance responsibilities

• Document associate relationships with written terms that clearly allocate responsibilities

• Maintain a reliable record of who performed each instruction

• Introduce a proper substitution process. Reassigning a job should follow a documented procedure, not an informal message

• Add clear cancellation terms to protect the business commercially as well as operationally

• Review your compliance position regularly as the business grows

Key takeaway

The sole trader exemption is a genuine starting point for many inventory businesses. It is not a permanent position.

As businesses grow and begin using associates to fulfil work, the compliance picture changes. Clear contracts, documented processes, and consistent record-keeping are not administrative overhead. They are how a business demonstrates it has been run properly and how it protects itself if that is ever called into question.

If you have any questions about how the new right to work framework may affect you or your supplier arrangements, please contact Katie Good, immigration specialist at Travers Smith, who can provide tailored advice on your specific position.

A note from Klerky

Klerky will continue to share practical guidance for customers and suppliers as these changes take effect, including updates to its terms of service and supplier SLA templates.