Recent Changes to the Construction Industry Scheme (CIS)

Several important changes to the Construction Industry Scheme (CIS) came into effect from 6 April 2026 following measures announced in the Autumn Budget 2025.

The changes increase reporting responsibilities for contractors, reintroduce stricter penalty rules for late CIS returns, and strengthen HMRC’s powers in cases involving fraud and Gross Payment Status (GPS).

Businesses operating within the construction sector should ensure they fully understand the new requirements to avoid unnecessary penalties and compliance issues.

Monthly CIS Returns Now Mandatory

From April 2026, contractors are legally required to either:

• Submit a CIS return every month, including nil returns where no subcontractors have been paid; or

• Notify HMRC in advance that no subcontractor payments will be made during that month by submitting an inactivity request.
  

This marks a return to stricter filing obligations, even during periods where there is no CIS activity.

CIS Late Filing Penalties Reintroduced

With the nil return filing requirement reinstated, HMRC has also brought back the full CIS late filing penalty regime.

Where a CIS return is filed late, the following penalties may apply:

• An initial fixed penalty of £100

• A further fixed penalty of £200 after two months

• A tax-geared penalty after six months of the greater of:

  • £300; or

  • 5% of the liability that should have been reported

• An additional tax-geared penalty after 12 months

  
  

The level of the 12-month penalty will depend on the circumstances surrounding the late filing and whether HMRC believes the delay was deliberate.

Tougher HMRC Powers Around Fraud & Gross Payment Status

HMRC has also introduced enhanced compliance powers where payments are connected to fraudulent activity.

If HMRC believes a business made or received a payment that they knew - or should reasonably have known - was linked to fraud, they can now:

• Immediately remove Gross Payment Status (GPS)

• Assess the business for lost tax

• Charge penalties of up to 30%

• 
  

In addition, where Gross Payment Status is removed under these powers, the waiting period before reapplying has increased significantly from one year to five years.

What Businesses Should Do Now

Construction businesses should review their CIS processes to ensure:

• Monthly returns are submitted on time, even where no subcontractors are paid

• Internal systems can identify months requiring nil returns or inactivity requests

• Record keeping and subcontractor verification processes remain robust

• Staff understand the increased compliance risks surrounding Gross Payment Status
  

Early action can help reduce the risk of penalties and minimise disruption to operations.

How SJC Chartered Accountants Can Help

At SJC Chartered Accountants, we support contractors and subcontractors across the construction sector with CIS compliance and tax planning.

Our services include:

• CIS return preparation and filing

• Assistance with nil returns and inactivity notifications

• Gross Payment Status reviews and support

• CIS compliance health checks

• HMRC enquiry and penalty support

• Construction sector tax advice
  

If you would like guidance on how the April 2026 CIS changes may affect your business, contact the team at SJC Chartered Accountants.