The Construction Industry Scheme has had its biggest set of administrative changes in years. The reforms took effect on 6 April 2026 and apply to the 2026 to 2027 tax year onwards. Most of the change is aimed at fraud and compliance, not at how the scheme works day to day, but two of the new rules will catch contractors and subcontractors out if they are not actively managed.
This post walks through the four practical changes, who each one affects, and what we are doing for the construction clients on the books at Barton across Ashby-de-la-Zouch, Swadlincote, Burton upon Trent and Coalville.
The four changes that matter.
HMRC's package covers a longer list of technical amendments, but four are doing the heavy lifting on the ground:
- Gross Payment Status can be withdrawn with immediate effect where HMRC identifies fraud.
- The ban on reapplying after a fraud-related withdrawal moves from one year to five.
- Contractors must file a nil CIS300 return for any month with no subcontractor payments unless HMRC has been notified in advance.
- Payments to local authorities and certain public bodies are now exempt from CIS.
None of these changes the deduction rates. Subcontractors are still on 20 per cent if registered, 30 per cent if not, and 0 per cent if they hold Gross Payment Status. Materials are still excluded if invoiced separately and clearly identified.
1. Gross Payment Status — immediate withdrawal for fraud.
Before April 2026, HMRC removed Gross Payment Status through the existing compliance review cycle. A late return or a missed payment would put a holder on warning, and serious non-compliance over the review period could see status pulled at the next review.
From 6 April 2026, HMRC has a new fast-track power. Where it identifies that a business has made or received a payment connected to fraud, including where the business should have known of the fraud, it can withdraw Gross Payment Status with immediate effect. It can assess the associated tax loss at the same time and impose a penalty of up to 30 per cent.
The practical risk for honest construction Ltd companies and partnerships is supplier-chain exposure. If a labour-only subbie further down the chain turns out to be a fraud, HMRC's "should have known" test puts a real obligation on the contractor to know who they are paying. Cash payments outside the books, vague invoicing, and unverified subcontractor UTRs all become higher-risk now than they were last year.
The fix is unglamorous but effective: every subbie verified through the HMRC online checker before the first payment, every invoice properly raised in the subbie's company name with a UTR, every payment made through the bank, and every CIS deduction logged in the bookkeeping system on the day it happens.
2. Five-year reapply ban for fraud-related withdrawals.
Where Gross Payment Status is withdrawn for fraud or serious non-compliance, the business is now barred from reapplying for five years. The previous limit was twelve months, which most growing construction Ltd companies could absorb.
Five years is a different kind of penalty. For a Ltd subbie turning over £100,000 of net labour, losing Gross Payment Status pushes roughly £20,000 of cash a year onto HMRC's balance sheet instead of the company's. Over five years that is £100,000 of working capital out of reach. The new ban is intentionally heavy because the scheme has had real fraud problems and HMRC wants the deterrent to bite.
For anyone holding Gross Payment Status today, the implication is straightforward. The compliance test was already strict. From April 2026 it is also longer-lived if you fall on the wrong side of it. Treat the twelve-month rolling compliance window as a board-level priority, not as something the bookkeeper looks at once a year.
3. Nil returns — file every month.
This is the change most likely to generate avoidable penalties for small contractors. From 6 April 2026, a contractor must file a nil CIS300 return for any month in which they did not pay any subcontractors. The only way to avoid filing the nil return is to have notified HMRC in advance that no subcontractor payments will be made that month.
HMRC's stated aim is the opposite of what it looks like at first glance. Under the previous rules, contractors could be issued automatic late-filing penalties for months they had not filed because there was nothing to report. The new rule formalises the nil return as a positive declaration that nothing happened that month. File one every month, and the penalty letter never arrives.
The practical setup is a recurring task in the practice's compliance calendar. Anyone we act for on CIS contractor returns now has a monthly nil-or-real return scheduled regardless of whether subcontractor activity is expected. Skip a month and the penalty is automatic.
4. Public bodies — now outside CIS.
The fourth change is administrative relief. Payments made to local authorities and certain other listed public bodies are exempt from the scheme from 6 April 2026. Contractors paying a council, for example, for work that previously fell inside CIS no longer need to make a deduction or report the payment on the CIS300 return.
This will only affect the minority of contractors who actually pay public bodies for construction services, but for those who do, it is a clean win on admin. Update the subcontractor list in your accounting system, mark the public-body payees as out of scope, and the next CIS300 will reflect it.
What we are doing for Barton clients this month.
The standard response across the construction book at Barton is four steps:
- Re-verify every subbie on the books through the HMRC CIS online checker, even those we have used for years. Print the verification, save it to the client folder. The "should have known" test makes documented verification the first line of defence.
- Tighten the bank-trail rule. No cash payments to subbies, every invoice in the subbie's full registered name, every payment cross-referenced to an invoice number. The audit trail is what answers the fraud-connection question if it ever comes up.
- Schedule monthly nil-or-real returns for every contractor client, not just the ones with active subbies, so a quiet month does not turn into an automatic penalty.
- Run a Gross Payment Status compliance pre-check for every Ltd subbie that holds it. Twelve-month review of every PAYE, VAT, corporation tax and self-assessment filing and payment. If anything looks marginal, fix it before HMRC's next review window opens.
For contractors and subcontractors not currently on a proper compliance cycle, the new five-year reapply ban means the cost of getting it wrong has gone up materially. The work to stay clean has not changed. The penalty for slipping has.
Ashby, Swadlincote, Burton, Coalville — local construction practice.
The construction sector across the East Midlands is heavy on CIS and has been for years. The April 2026 reforms apply equally to a one-van groundworker through to a multi-trade Ltd contractor running ten subbies a week. The harder edges of the new rules will be felt most by contractors who treat CIS as an annual problem instead of a monthly one.
We act for groundworkers, electricians, joiners, plasterers, scaffolders, roofers and general builders across Ashby-de-la-Zouch, Swadlincote, Burton upon Trent, Coalville, Woodville and Church Gresley. CIS verifications, monthly returns, EPS submissions, Gross Payment Status applications and the year-end refund cycle are bread and butter for the firm.
If you run a construction business and you are not sure whether your CIS process is set up for the post-April 2026 rules, talk to us. Twenty minutes on the phone is usually enough to tell you whether anything is exposed.
The deduction rates have not changed. The administrative discipline required to stay compliant has. Five-year reapply bans and immediate Gross Payment Status withdrawals turn a slow problem into a fast one.
Frequently asked questions
When did the 2026 CIS changes take effect?
From 6 April 2026, applying to the 2026 to 2027 tax year onwards. The four headline changes are immediate Gross Payment Status withdrawal for fraud, a five-year reapply ban, mandatory monthly nil returns, and a public-body exemption.
Can HMRC remove Gross Payment Status without notice now?
Yes. Where HMRC identifies a payment connected to fraud, including where the business should have known of the fraud, it can withdraw Gross Payment Status with immediate effect, assess the tax loss and impose a penalty of up to 30 per cent.
Do contractors have to file a nil return every month now?
Yes, unless HMRC has been notified in advance that no subcontractor payments will be made that month. The simplest workflow is to file a nil CIS300 return through the HMRC online service every month the contractor has no subbie activity.
Are payments to councils and public bodies still inside CIS?
No. Payments to local authorities and certain other listed public bodies are exempt from CIS from 6 April 2026. Contractors no longer need to deduct or report those payments.