From 6 April 2026, HMRC is introducing several important updates to the Construction Industry Scheme (CIS). These changes aim to reduce fraud and improve compliance across the construction sector – but they also mean new responsibilities for contractors and subcontractors.

Here’s a clear overview of what’s changing with CIS and how it may affect your construction industry business.

Stronger HMRC powers to tackle fraud and non‑compliance

HMRC is strengthening its enforcement powers where a business “knew or should have known” it was involved in a CIS‑related fraud.

This includes the ability to:

Remove Gross Payment Status (GPS) immediately
Block reapplication for GPS for 5 years (up from 1 year)
Transfer tax liability to the end user – so the business that entered into the transaction connected to the fraud is liable for the lost tax
Impose penalties of up to 30% of any lost tax to the business found liable, as well as to its directors and other people connected with the business

These changes make good bookkeeping, accurate returns and proper subcontractor verification more important than ever.

The changes are part of the Government’s crackdown on fraud in the construction sector. More details are outlined in the policy paper published in November 2025. They will come into effect on April 6, 2026.

Increased responsibility across the supply chain

New legislation allows HMRC to pursue multiple parties in the supply chain if incorrect payments or returns are made – even where errors are due to carelessness rather than deliberate wrongdoing.

This means:

You must carry out proper due diligence on anyone you work with
Poor practices by subcontractors can put your business at risk

Payments to public bodies will be exempt from CIS

The Government also intends to make a number of changes to simplify the CIS.

In the Autumn Budget 2025, the Chancellor committed to simplifying the system. The current draft legislation closed to consultation in February and the following changes are expected to come into effect on April 6, 2026.

Under these changes, from April 2026, some payments will no longer fall under CIS rules. This applies to payments made to:

Local authorities
Certain public bodies

This means that for payments to these organisations there will be:

No CIS deductions
No reporting required

The Government says this change is designed to simplify administration for construction industry businesses in areas where CIS was never intended to apply.

Monthly NIL returns are being reintroduced

If you’re a contractor and don’t pay any subcontractors in a month, you’ll once again be required to file a NIL CIS return, unless you have told HMRC in advance that no payments will be made.

Why this matters: