A Summary of the CIS Reforms (April 2026)

We have summarised the key developments impacting the Construction Industry Scheme (CIS) from April 2026.

So, what’s changed?

Stronger HMRC powers

HM Revenue and Customs now has enhanced authority to act where a business “knew or should have known” about fraud within its supply chain. This includes the ability to remove Gross Payment Status immediately and apply penalties of up to 30 percent.

Tougher consequences for non-compliance

The implications of losing Gross Payment Status are now far more severe. The waiting period to reapply following cancellation has increased from one year to five years, significantly raising the stakes for maintaining compliance.

Return of monthly nil returns

Contractors are again required to submit monthly returns even when no payments are made. The only exception applies where HMRC has been notified in advance of a dormant period of up to six months, reducing administrative burden only if managed proactively.

Public sector exemption

Payments to local authorities and certain public bodies are now excluded from CIS. This simplifies reporting requirements for specific types of projects involving public sector entities.

Why it matters

These reforms are designed to close compliance gaps and reduce fraud, but they also place far greater responsibility on contractors. Under the “should have known” rule, failing to identify risks within your supply chain is no longer a valid defence.

Who is impacted?

Main contractors and businesses engaging subcontractors

There is increased responsibility for supply chain due diligence, greater exposure to financial penalties of up to 30 percent, and ongoing administrative requirements for monthly reporting.

Small and medium construction firms

These businesses face more complex compliance processes, increased reporting obligations, and a greater need for structured subcontractor onboarding and monitoring.

Subcontractors

Subcontractors will experience increased compliance checks from contractors, greater scrutiny of tax status, and a risk of losing Gross Payment Status for up to five years if requirements are not met.

What should businesses be doing now?

Businesses should strengthen subcontractor verification and due diligence processes immediately. Internal systems for monthly reporting and record keeping should be reviewed to avoid nil return errors. Teams must understand the risks of engaging with non-compliant supply chains. It is also important to prepare for increased HMRC scrutiny and potential audits.

If you operate in construction or engage subcontractors, now is the time to ensure your CIS processes are fully compliant with the new rules.

At Stonebridge Contracting, we provide a structured onboarding process that reduces compliance risk and creates a clear audit trail. We support our clients in adapting to these changes, helping ensure compliance while reducing risk across complex labour supply chains.