CIS changes from April 2026: what construction businesses need to know

From 6 April 2026, changes to the Construction Industry Scheme (CIS) will tighten compliance, increase reporting expectations and sharpen HMRC’s approach to fraud and supply chain risk. These are not cosmetic updates. They affect how contractors operate month to month, how subcontractors are assessed, and how risk is managed across the whole engagement chain.

This article sets out what is changing, what it means in practice, and what businesses should be doing now.

Monthly returns: back to full reporting discipline

Contractors will be required to submit CIS returns every month, including nil returns where no subcontractor payments have been made.

In practical terms this means:

• No gaps in reporting

• No assumption that inactivity removes obligations

• A greater risk of automatic penalties where returns are missed

This reinforces a simple expectation from HMRC. If you are registered as a contractor, you must actively confirm your position each month.

For many businesses, this will mean reviewing internal processes and ensuring responsibility for CIS submissions is clearly owned and monitored.

Public body payments: clearer boundaries

Payments made to certain public bodies, including local authorities, will be fully outside the scope of CIS.

This replaces previous concession-based treatment and gives clearer guidance on when deductions should not be applied.

For contractors, the key point is accuracy. Applying CIS deductions incorrectly can create unnecessary administration, disputes, and potential reputational risk.

Gross Payment Status: much higher stakes

Gross Payment Status (GPS) remains a valuable position for subcontractors, but the consequences of getting things wrong are becoming more severe.

From April 2026:

• HMRC can cancel GPS immediately where fraud is identified or suspected

• Businesses that “knew or should have known” about fraudulent activity are at risk

• Penalties of up to 30 percent of the tax lost can be applied

• Reapplication for GPS can be blocked for up to five years

This is a significant shift. It moves the focus beyond individual compliance and into supply chain responsibility.

Contractors and subcontractors alike will need to demonstrate that they understand who they are working with and that reasonable checks have been carried out.

VAT reverse charge: enforcement is increasing

Although not new legislation, enforcement of the VAT Domestic Reverse Charge (DRC) within construction is becoming more active.

Common issues include:

• Incorrect invoicing

• Applying VAT where the reverse charge should be used

• Failing to apply the reverse charge when required

HMRC is now more likely to raise assessments and penalties where errors persist.

For businesses, this means the margin for misunderstanding is narrowing. Systems, training and internal checks need to be aligned with the rules.

What this means for your business

Taken together, these changes signal a clear direction:

• More frequent and consistent reporting

• Greater accountability across supply chains

• Reduced tolerance for error

• Faster and more direct enforcement

Practical steps to take now

1. Review your CIS process

   
   

   Ensure monthly returns are built into your routine, even when no payments are made.

   
   

2. Strengthen subcontractor checks

   
   

   Verify status correctly and keep records of due diligence.

   
   

3. Check your VAT treatment

   
   

   Confirm when the domestic reverse charge applies and ensure invoices reflect this.

   
   

4. Train your team

   
   

   Payroll, finance and operational teams need to understand both CIS and VAT requirements.

   
   

5. Keep clear records

   
   

   Documentation will be critical if HMRC raises queries or challenges decisions.

The construction sector has always required careful handling of tax rules, but April 2026 marks a shift towards tighter control and greater accountability.

Businesses that treat this as a compliance exercise may find it burdensome. Those that embed it into their operational standards will be better placed to manage risk and maintain confidence with clients and HMRC alike.

If you would like support reviewing your CIS processes or understanding how these changes affect your business, TCW can help

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