As outlined in Autumn Budget 2025, several changes took place on 6 April that may affect those who use the Construction Industry Scheme.
From April 2026, contractors are required by law to either:
- file a CIS return every month, including nil returns in months where they have not used a subcontractor; or
- inform HMRC in advance that they will not pay subcontractors that month by submitting an inactivity request.
From April 2026, with the nil filing requirement back in place, HMRC have reinstated a full CIS late filing penalty regime. If you file a late CIS return, a £100 fixed penalty will apply. You may also subsequently be charged:
- A second fixed penalty of £200 after two months.
- A tax-geared penalty at six months of a minimum of £300 or 5% of any liability which should have been shown on the return.
- A further tax-geared penalty at 12 months – the amount of this penalty will depend on why the return was late.
In situations where a business makes or receives a payment they knew or should have known was connected to fraud, HMRC now have enhanced powers to immediately remove Gross Payment Status (GPS), assess for lost tax and charge a penalty of up to 30%. If GPS has been immediately removed, the time limit for reapplication is increased from one year to five years.
