From 6 April 2026, some significant changes hit the Construction Industry Scheme. Some make life easier. Others make the stakes considerably higher. Here’s what’s changing and what you need to do about it.
The Big Picture: What’s Actually Changing?
The government announced these CIS changes in the Autumn Budget 2025, with draft regulations published for consultation in late 2025. The changes are designed to tackle fraud whilst simplifying certain administrative bits. Whether they’ll achieve both remains to be seen, but ready or not, they’re coming.
Four main changes matter:
1. NIL Returns Are Back
Remember when you could skip filing CIS returns for months when you hadn’t paid any subbies? That ends in April 2026. If you pay no subcontractors in a month, you must now file a NIL return. Unless you’ve pre-notified HMRC in advance that no payments will be made.
HMRC scrapped mandatory NIL returns back in 2015, thinking it would reduce admin. Turns out it just created more confusion and erroneous late-filing penalties. So they’re bringing them back.
What this means for you:
If you have seasonal or irregular subcontractor usage, you’ll need to either file NIL returns for quiet months or set up a system to pre-notify HMRC when you know no payments are coming. Miss a NIL return and you’ll face the same penalties as missing a standard return. Starting at £100.
2. Public Bodies Exempted From CIS
Payments to local authorities and certain public sector bodies are now fully exempt from CIS. Previously, HMRC used an unofficial concession to treat these bodies as if they held Gross Payment Status. But not from April.
What this means for you:
If you work with councils, housing associations or other qualifying public bodies, you won’t need to make CIS deductions or include these payments in your CIS returns. Less admin, clearer compliance. This is genuinely helpful.
The Serious Bit: Fraud Powers and GPS Changes
Here’s where things get tougher. HMRC’s new fraud-tackling powers are significant.
And they’re not just targeting obvious criminals.
3. “Knew or Should Have Known” Standard
From April, if you make or receive a payment connected to fraud – and you knew or should have known it was dodgy – HMRC can act immediately.
This isn’t just about deliberate fraud. “Should have known” catches carelessness, inadequate checks, even not asking enough questions. If you fail to properly verify subcontractors, don’t scrutinise labour-material splits, or work with suppliers that seem too good to be true, you could be liable.
What HMRC can do:
- Remove Gross Payment Status immediately (if you have it)
- Assess you for the tax loss
- Impose penalties up to 30% of the lost tax
- Apply penalties to the business and potentially its directors personally
- Pursue multiple parties in the supply chain
This is the “knew or should have known” bit in action. HMRC can look at everyone involved in a transaction and hold multiple parties liable based on what’s deemed reasonable for them to have spotted.
4. Five-Year GPS Ban
Previously, if HMRC removed your Gross Payment Status for non-compliance, you couldn’t reapply for one year. Under the new rules, if GPS is withdrawn due to fraud or serious non-compliance, you’re barred from reapplying for five years.
That’s five years of having 20% deducted from every invoice. For businesses relying on GPS for cashflow, this is potentially catastrophic.
What Construction Businesses Need to Do Now
Sort your processes:
Control processes matter more than ever. The biggest risk? Deeming a payment outside CIS scope when HMRC later decides it wasn’t. This could fall under the new “should have known” standard.
Make sure everyone handling CIS understands the rules. Staff training isn’t optional anymore. It’s risk management.
Tighten subcontractor verification:
Always verify subcontractors with HMRC before paying them. Use the verification status HMRC confirms, not what the subby claims. Re-verify if there’s been a gap in service.
For subbies without GPS, scrutinise labour-material splits properly. Check whether they own or hire plant. Verify any markup on materials.
Keep your HMRC details current:
Make sure HMRC has the correct address for your business and specifically for whoever handles CIS. If HMRC issues a change to a subcontractor’s status and it goes to the wrong address, they’ll consider that your problem. Even if you never saw it.
Plan for NIL returns:
If you have periods with no subcontractor activity, decide now: will you file NIL returns or set up pre-notification with HMRC? Either way, you need a system that prevents missed filings.
Audit your supply chain:
With HMRC’s power to pursue multiple parties, your exposure now includes your subcontractors’ compliance. If they’re involved in fraud and you “should have known,” you’re potentially liable.
Look for red flags: unusually low quotes, reluctance to provide documentation, inconsistent information, operations that don’t match their claimed business structure.
What Hasn’t Changed
CIS deduction rates remain the same: 20% for registered subbies, 30% for unregistered, 0% for GPS holders.
Monthly filing deadlines stay the same: 19th of the month following the tax month (which runs from the 6th to the 5th).
The fundamental operation of CIS, i.e. contractors deducting and passing tax to HMRC, remains unchanged.
The Bottom Line
April 2026 brings both simplification and significantly increased risk.
The message from HMRC is clear: proper processes, thorough checks and documented due diligence are now essential. Generic accounting software might handle CIS calculations, but it won’t protect you from the new liability standards.
If your CIS processes rely on memory, spreadsheets, or just hoping for the best, now’s the time to sort them properly. The penalties for getting it wrong just got considerably steeper, and ignorance is no longer a defence.
At HardHats, we help construction businesses navigate CIS compliance alongside employment status. Both of these matter. And both of these need proper attention. If you want to ensure your processes stand up to the new April 2026 rules, get in touch before the shit hits the fan.