HMRC Unveils Further Plans to Reduce CIS Abuse

From April 2026, the government will hold businesses operating within the Construction Industry Scheme (CIS) accountable for lost tax if they are deemed to have engaged with organisations engaged in tax evasion.

First announced in an official Budget 2025 publication, the government will implement new measures from April 2026 to punish construction businesses that "operate within the Construction Industry Scheme (CIS) who knowingly enter into transactions connected to fraud".

While acknowledging these new measures will apply to a "small minority" of businesses, where the government can prove that a business was aware (or should have been aware) that they have entered into a transaction with a company fraudulently evading tax, the following measures will apply:

• The immediate cancellation of Gross Payment Status (GPS), and the business cannot reapply for 5 years.

• The business that engaged in a transaction involving fraud will be liable for the loss of tax.

• A "penalty of 30% of the lost tax to be charged to the business found liable, as well as to its directors and other persons connected to the business" 

  
  

The new rules will be introduced into the Finance Bill 2025-26, with various amendments to the FA04 and the Income Tax (Construction Industry Scheme) Regulations 2005. More information is available here.

The Office for Budget Responsibility estimates the measures will generate over £750m for the Exchequer between 2025 and 2031.

The new measures have come on the back of numerous government plans to reduce non-compliance within the construction sector, including mandatory identity verification at Companies House, the sending of “nudge” letters to contractors, and plans to extend right-to-work checks to include self-employed contractors.