HMRC’s Policy Paper ‘Tackling Construction Industry Scheme fraud’ outlines CIS compliance measures. Legislation to be effective from April 2026 says HMRC will get new powers where the employer ‘knew or should have known’ there was an attempt at CIS tax avoidance or evasion.
From April 2026, HMRC will be able to:
- Withdraw / cancel Gross Payment Status (GPS) of the taxpayer. Once this status is removed, the time limit to reapply will increase from one year to five;
- Require the employer / contractor to pay the lost tax: and
- Impose a penalty equal to 30% of the lost tax revenue
Point 4.130 also says that Regulations would be available for consultation ahead of an implementation date of April 2026. These are aimed at ‘simplifying and improving the administration’ of the Scheme. On 06 January 2026, this consultation on the draft legislation and an Explanatory Note was published.
After consultation, the main amendments are:
Simplification – Payments Made to Public Bodies
HMRC have in place an Extra Statutory Concession (ESC) allowing some public bodies to be treated as holding GPS, meaning the bodies within this concession can receive contract payments without CIS tax deductions.
The legislation, effective April 2026 will formalise this ESC and exempt these bodies altogether, i.e. taking them out of the scope of CIS.
Improvements – The Nil Return
Where no contract payments were made in a month, up until 2015, there was a requirement for a nil return. However, this nil filing obligation was removed in the name of reducing administration burdens.
HMRC’s consultation says the UK Government has concluded that this did not happen and, in fact, led to an increased burden as it resulted in an increase in the number of late filing penalties, some of which were appealed successfully, others were not.
From April 2026, the nil return is reinstated, however, will not apply if the Scheme has voluntarily advised HMRC that one does not need to be submitted.
For Bookkeepers
With regard the return of the nil return, unless HMRC have been told not to expect one anyway, we also agree this is an improvement if it means a reduction in the issue and subsequent appeal of a later filing penalty – i.e. appealing when there is nothing to declare. Members should note, however, that penalties will now be correctly charged if a nil return is not sent (or HMRC have not been informed). Perhaps, an improvement and a consideration combined
