If you work in construction as a contractor or subcontractor, it’s important to understand the potential changes to the Construction Industry Scheme that may take effect from 6 April 2026.
While some adjustments are simple administrative updates, others grant HMRC increased authority to tackle non-compliance. Preparing late can lead to penalties, audits, and unnecessary disruptions. Here’s a straightforward overview of the upcoming changes, their impact, and recommended actions.
What Is CIS and Why Are Changes Being Considered?
The Construction Industry Scheme (CIS) regulates how contractors manage payments to subcontractors, including withholding taxes and reporting to HMRC. You can find the full official framework on the HMRC Construction Industry Scheme guidance page.
HMRC has raised ongoing concerns about inconsistent compliance across the sector, mistakes in reporting and verification, and fraud within labour supply chains.
Consequently, consultations have aimed to enhance oversight and streamline certain administrative procedures.
Monthly Reporting and Nil Returns
One topic being discussed is the strengthening of monthly reporting requirements, especially during times when no payments are made to subcontractors.
Historically, the requirement to submit nil returns was removed in April 2015 to reduce administrative burden. However, in practice, this has led to confusion around reporting obligations, particularly where contractors have periods of inactivity.
In some cases, if HMRC still expects a return and no notification has been given, this can lead to late filing penalties.
Payments to Public Bodies: A Formal Exemption
Another topic under review is how payments to public sector bodies are handled under the Construction Industry Scheme (CIS). Historically, certain organisations—such as local authorities—have been subject to distinct treatment, with specific payments exempt from CIS deductions. However, this practice has been characterised by a lack of definitive legislative guidance, thereby fostering uncertainty for contractors.
The proposed amendments are intended to establish a more explicit legal definition and clarify whether payments to designated public sector bodies fall within or outside the scope of CIS. Such clarification would enhance confidence for businesses engaging with public sector clients, minimise errors in CIS applications, and potentially streamline reporting obligations when payments are confirmed to be outside the scheme.
Stronger Compliance and Enforcement Approach
A primary emphasis in HMRC’s approach is on improving accountability within contractor supply chains. This encompasses verifying whether businesses have exercised reasonable due diligence in vetting subcontractors, maintained accurate records, and responded appropriately to available information.
Furthermore, an enhanced application of the “reasonable care” standard is expected to align CIS regulation more closely with other areas of tax compliance. The HMRC compliance checks guidance outlines what businesses can expect when HMRC reviews their records and procedures.
For your organisation, this signifies that informal or undocumented procedures may pose increased risks, underscoring the importance of meticulous record-keeping and explicit verification procedures.
Gross Payment Status (GPS) Scrutiny
Although no final decisions have been made, ongoing consultations suggest there could be increased scrutiny of the Gross Payment Status (GPS), especially when compliance issues arise. This might involve quicker removal of GPS for non-compliance and implementing more thorough review procedures.
For subcontractors, this highlights the importance of staying fully compliant to preserve GPS, since losing this status could significantly affect cash flow and business operations.
Practical Steps You Can Take Now
The practical steps remain the same whether you’re dealing with nil returns, the public body exemption, or the supply chain enforcement risk.
Review your monthly reporting procedure
Ensure you understand the process for filing your CIS return and determine the appropriate actions for months with no subcontractor activity. Confirm that your team is informed to either file the return or notify HMRC accordingly during such months.
Review your subcontractor verification records
Demonstrating that you took reasonable steps to verify a subcontractor’s status now serves as a direct safeguard against the updated enforcement rules. Any gaps in your records could become your liability.
Enhance your supply chain due diligence
Contractors working with multiple subcontractors should establish clear processes for onboarding, verifying statuses, and continuous monitoring. If your current procedures are informal or lack documentation, it’s essential to formalise them before April 2026.
Keep your HMRC contact details up to date
HMRC issues notifications regarding updates in subcontractor status. Should these notices be sent to an outdated address or to an incorrect individual, and there is a failure to respond, the responsibility for any consequences lies with your business.
How The Infinity Group Can Help
At The Infinity Group, we provide a comprehensive CIS payroll service that oversees compliance and administrative tasks for contractors and subcontractors.
Our service executes all necessary compliance checks, including employment status determinations (IR35 and SDC checks), right to work, identity, and CIS status verifications. We manage the entire payroll process, which includes submitting CIS300 returns and managing nil submissions as required.
Furthermore, we continually monitor and re-verify subcontractor statuses to ensure ongoing compliance.
With our support, you can be confident that your CIS obligations are managed accurately, efficiently, and in line with current regulations.