New CIS Fraud Rules from April 2026: What Construction Businesses Need to Know
HMRC is introducing stronger powers to tackle fraud within the Construction Industry Scheme (CIS) from 6 April 2026, as part of wider tax compliance reforms. These changes are aimed at cracking down on fraudulent activity in the construction supply chain and ensuring that compliant contractors and subcontractors are protected.
Faster Action Where Fraud Is Suspected
Under the revised rules, HMRC will be able to act immediately if it has reasonable grounds to believe a business has been involved in a payment linked to fraud. This applies whether a company has made or received such a payment and even if it “should have known” about the fraud.
In practical terms, this means:
Gross Payment Status (GPS) can be withdrawn straight away — without warning.
A subcontractor who loses GPS will have tax deducted at the standard rate (20%) by contractors.
Losing GPS because of fraud or serious non-compliance now carries a much longer ban on reapplying (five years, up from one year previously).
For many businesses, especially smaller subcontractors, this will have a material impact on cash flow and trading flexibility if they fall foul of the new rules.
Heavier Penalties and Director Liability
In addition to immediate GPS revocation, the updated regime gives HMRC the power to:
Charge penalties of up to 30% of the lost tax related to the fraudulent activity.
Apply those penalties not only to the business but also, in certain circumstances, to its officers or directors.
That means senior individuals may face personal liabilities in cases where HMRC determines they played a role in, or failed to prevent, fraudulent payments. This is intended to discourage malpractice and ensure that decision-makers cannot hide behind the corporate veil.
CIS Simplification Measures Too
Alongside the tougher enforcement powers, the government has also proposed some administrative simplifications to the CIS. These include:
Exempting payments made to local authorities and certain public bodies from CIS reporting.
Reinstating the requirement for contractors to submit nil returns when no payments have been made.
Together, these updates aim to reduce administrative burden for compliant businesses while tightening the net around fraudulent activity.
So What Does This Mean for Your Construction Business?
For contractors and subcontractors working under the CIS, the key message is this:
From April 2026, HMRC will no longer be limited to reacting slowly to suspected fraud — it will be able to intervene immediately.
Losing Gross Payment Status now has far greater financial consequences and is much harder to regain than it was previously.
Directors and officers may be personally liable for penalties if the business is found to be complicit in fraud.
This makes it more important than ever to have robust compliance processes in place, including:
Strong subcontractor verification and due diligence
Accurate and timely CIS reporting
Clear internal controls around payments and supply chains
How Construction Tax & Finance Can Help
At CTF, we work with construction businesses to make sure their CIS compliance is not only accurate but also resilient against changes like this. We can help you:
Review your existing CIS processes
Strengthen due diligence on supply chain partners
Prepare for GPS reviews and penalty risk
Ensure HMRC reporting and documentation meets expectations
If you’re concerned about how the April 2026 changes could affect your business, or you want an expert compliance review before the new rules take effect, get in touch with our team. Book a call or WhatsApps us +1386366741 and we’ll help you navigate these reforms and protect your cash flow and position.