28 Sep Construction Industry Scheme Reforms 2026: What Contractors and Subcontractors in Bromley, Kent and Surrey Need to Know
You have a new labour supplier, a Construction Industry Scheme (CIS) return due and a project spanning several sites. Is routine verification enough? The Construction Industry Scheme changes mean businesses must examine transactions potentially connected with deliberate tax non-compliance. Here is what changed and what you should review.
Want to check your CIS position?
Our accounting support for trades includes bookkeeping, VAT and tax compliance. To get in touch, call 0208 776 0200, or email info@ctmp.co.uk. We can help review a new supplier arrangement.
Construction Industry Scheme changes 2026: the April CIS reform
From 6 April 2026, HMRC gained additional powers where a business knew, or should have known, that a construction payment was connected with another party’s deliberate failure to deduct or pay CIS or PAYE. It can assess a payer for 20% of the relevant payment. Similar rules address CIS credits claimed where deductions were never made or deliberately went unpaid.
A penalty of 30% of the assessed amount can also apply, with company officers potentially jointly liable in specified circumstances. Ordinary CIS deduction rates have not changed. Mainstream contractors must also file a nil monthly return when no subcontractors are paid, unless they make an appropriate advance inactivity notification. Payments to certain public bodies are now outside CIS.
When can gross payment status be cancelled under CIS?
Gross payment status allows approved subcontractors to receive eligible payments without CIS deductions, supporting cash flow. Under the 2026 fraud provisions, HMRC can cancel it immediately where the legal conditions concerning deliberate non-compliance are met. A five-year restriction on reapplying can follow relevant immediate cancellations, although appeal rights remain.
An ordinary bookkeeping mistake is not automatically fraud. If HMRC sends a cancellation notice, check its grounds promptly. The appeal period under the new provisions is 30 days.
A successful CIS check establishes the correct deduction treatment. It does not, by itself, answer every question about the people and payments behind a construction contract.
Is the CIS VAT compliance test new in 2026?
No. VAT filing and payment obligations joined the compliance test for obtaining and keeping gross payment status on 6 April 2024. It sits alongside CIS and direct-tax requirements, with allowances for minor failures.
Review returns, payments and HMRC correspondence together rather than treat VAT and CIS separately. Our Bromley contractors’ guide to tax deadlines can help you organise the recurring dates.
What does CIS subcontractor due diligence in 2026 involve?
HMRC expects checks appropriate to the risk, not a universal stack of paperwork. Importantly, asking questions is only useful if you act on suspicious answers. For contractors using several labour providers, a workable process is:
- Verify the subcontractor: Check new subcontractors with HMRC before payment and save the deduction rate. Reverify an existing subcontractor if they have not appeared on a CIS return in the current or previous two tax years.
- Confirm who you are dealing with: Match the trading identity, contract, invoice and payment details. Check company or VAT information where relevant.
- Question unusual arrangements: Very low labour prices, unexplained intermediaries, sudden supplier changes or requests to pay a different business warrant further enquiries.
- Record the outcome: Keep a dated note of concerns, explanations and action taken. Where a mismatch remains unresolved, consider holding payment while you investigate.
If a Kent labour supplier on a Bromley project asks a Surrey contractor to pay an unrelated company, earlier verification does not settle that discrepancy. Our guide to tax pitfalls for Surrey contractors covers related record-keeping risks.
When can a construction accountant in Bromley, Kent or Surrey help?
A review helps when you take on new labour providers, change payment arrangements or find inconsistencies between CIS, VAT and payroll. At CTMP, we check trade business paperwork in context and explain the reasoning clearly.
Keeping CIS compliant beyond April 2026
Know whom you are paying, what the transaction covers and what your checks revealed. Keep returns accurate, investigate unusual arrangements and review suppliers when circumstances change. Good records help legitimate businesses explain their decisions.
Talk to CTMP about your trade accounts
If you would like help reviewing your records, call 0208 776 0200, email info@ctmp.co.uk or contact our team to discuss your circumstances.
Frequently asked questions
Must I file a nil CIS return with no subcontractor payments?
Usually, yes. From April 2026, mainstream contractors must file a nil monthly return unless they have made an appropriate advance notification of inactivity.
Can a small VAT error automatically remove gross payment status?
No. VAT has been part of the gross payment compliance test since 2024, with allowances for minor failures. The circumstances of any breach matter.
Is HMRC subcontractor verification enough for due diligence?
No. Verification confirms CIS registration and deduction treatment. Proportionate checks on the wider transaction and any warning signs are separate considerations.
What is the new CIS fraud penalty?
It can be 30% of HMRC’s determination under the 2026 provisions. The underlying assessment depends on the type of affected payment or CIS credit.
Can a subcontractor appeal immediate gross payment status cancellation?
Yes. There are appeal rights. For cancellation under the new fraud provisions, HMRC requires a written appeal within 30 days of cancellation.