This tax year HMRC has been handed new powers to help tackle perceived fraud in the administration of the Construction Industry Scheme (CIS).

From 6 April 2026, if a business makes or receives a payment that it knew or should have known was connected to fraud, HMRC can:

• immediately remove Gross Payment Status (GPS)
• assess the business for the related tax loss
• charge a penalty of 30%, which can apply to the business or its officers

In addition, those who have GPS removed immediately due to fraud or serious non-compliance will be prevented from reapplying for GPS for a period of 5 years.

HMRC envisage refinement to CIS will add £205 million to tax collections from the sector in the tax year 2026/2027 alone. 

Who is this targeting

Businesses who operate within the Construction Industry Scheme (CIS) who knowingly (or unwittingly due to a lack of due diligence) enter into transactions connected to fraud will be affected by these measures.  

General description of the measure 

These measures tackle businesses who knowingly (or unwittingly due to a lack of due diligence) engage in processes which are deemed tax evasion.

Where it can be shown that a business knew or should have known that they entered into a transaction that was connected with the fraudulent evasion of tax, the measures:  

1. Provide for the immediate cancellation of Gross Payment Status (GPS).
2. Make the business who entered into the transaction connected to fraud liable for the lost tax. 
3. Allows a penalty of 30% of the lost tax to be charged to the business found liable, as well as to its directors and other persons connected to the business.  

The time limit for reapplication where GPS has been immediately removed is also increased from one year to 5 years. The other grounds for immediate GPS cancellation are where a business has provided false information at registration for GPS, has fraudulently made an incorrect return or provided incorrect information, or knowingly failed to comply with a CIS obligation. 

Policy objective 

These measures support the government’s objective to close the tax gap, tackle non-compliance and make the tax system fairer. These measures protect the Exchequer from revenue losses — this will also reduce the large sums of money going to organised criminal gangs involved in supply chain fraud in construction or involving CIS deductions. They also ensure that there is level playing field by preventing fraudulent operators under-cutting the compliant businesses that operate within the rules. 

Changes to this legislation ensures these businesses undertake the necessary due diligence to prevent illegitimate operators from entering the market. Where businesses do knowingly engage in fraudulent supply chains, GPS will be removed immediately and the business will be made liable for the tax losses, and penalties will be chargeable on the business itself and its directors, or other persons connected to the business.  

Background to the measure 

There have been several reforms in recent years to tackle non-compliance within the construction sector. In 2021 changes were made to reduce the abuse of the CIS, and to tackle VAT losses due to supply chain fraud. In 2023, HMRC consulted on measures to further strengthen the scheme and introduced legislation in April 2024 to bolster the GPS tests.  

These powers are designed to help HMRC tackle fraud and non-compliance within the scheme. However, HMRC assert that serious non-compliance in the construction sector continues to develop and remains a significant risk – this includes sophisticated fraud by criminals.

The measure was first announced at Budget 2025. 

Current law  

The current CIS legislation can be found in Part 3, Chapter 3 and Schedule 11 Finance Act 2004 (FA04) and in the Income Tax (Construction Industry Scheme) Regulations 2005 (S.I. 2005/2045). 

Proposed revisions 

Legislation will be introduced in Finance Bill 2025-26 to amend Part 3, Chapter 3 in FA04 and S.I. 2005/2045. Section 66(3) in FA04 will be amended to provide the power to immediately remove GPS where a business knew or should have known that the payments made or received were connected with fraudulent evasion of tax. 

Section 66(7) of FA04 is amended to prevent re-application for a period of 5 years where GPS is cancelled under Section 66(3) of FA04. 

New legislation will also be introduced in Part 3, Chapter 3 FA04 and S.I 2005/2045 to allow the business that knew or should have known that the payments made or received were connected with fraudulent evasion of tax liable for the lost tax and penalties of up 30% of the lost tax. The officers of the business could also be liable for these penalties.  

Practical Steps for Contractors

To reduce exposure under the strengthened CIS rules, FIS Members should prioritise the following actions:

Practical Steps for FIS Members to Consider

To reduce exposure under the strengthened CIS rules, contractors should prioritise the following actions:

• Strengthen supply‑chain due diligence
• Map the full labour chain, identifying any umbrella companies, payroll intermediaries or outsourcing partners
• Verify subcontractor tax registrations, trading history and insurance
• If using an Agency or Umbrella verify PAYE operation by e.g. reviewing sample payslips, submissions and confirming employment status and entity employing the worker
• Check for any warning signs such as recent director changes, short‑lived tenures, entities or unusually low pricing
• Obtain written confirmation that no offshore, mini‑umbrella or non‑compliant payment models are used
• Reject arrangements lacking transparency or involving intermediaries who cannot clearly explain how workers are paid and taxed
• Review and tighten labour‑only subcontractor contracts
• Ensure contracts clearly set out CIS obligations, tax responsibilities and payment terms
• Require confirmation of correct PAYE operation where applicable
• Include rights to request evidence of tax compliance and workforce arrangements
• Build in termination rights where compliance concerns arise
• Revisit existing contracts to ensure they reflect current CIS risks
• Review onboarding and procurement processes
• Embed CIS compliance checks into tendering and subcontractor approval, where appropriate consider declarations confirming tax compliance and payment practices
• Reassess high‑risk suppliers regularly, not just at onboarding
• Improve internal governance and oversight
• Ensure directors and senior managers have visibility of CIS risks
• Formalise reporting lines and escalation procedures
• Conduct periodic internal reviews of CIS controls and supply‑chain monitoring
• Maintain comprehensive documentation
• Keep records of due‑diligence checks, decisions and follow‑up actions
• Document any concerns raised and how they were addressed
• Ensure audit trails exist for all CIS‑related payments
• Act early when red flags appear
• Seek clarification or additional evidence from suppliers
• Replace non‑compliant or high‑risk operators promptly
• Consider pause payments where compliance thresholds are not met (this is a last resort and should only be done when taking appropriate legal advice!).

By embedding these controls into everyday operations, contractors can demonstrate that they have taken reasonable steps to prevent fraudulent operators entering their supply chain and significantly reduce the risk of GPS loss, tax assessments and penalties.

There remains a close link between tax evasion and modern slavery.

Finishes and Interiors Sector (FIS) has supported a recent Telegraph investigation that highlights mounting pressure within the UK housebuilding sector and the growing consequences for specialist supply chains. 

The article focuses on Vistry Homes, one of the UK’s largest housebuilders. While headlines have focused on balance‑sheet risk and market uncertainty, the Telegraph also draws attention to a persistent and systemic issue: late payment and cashflow pressure being pushed down the supply chain. This mirrors long‑standing concerns raised by FIS members and repeatedly escalated by FIS to Government. 

Government‑published payment data referenced in the article shows Vistry pay 50% of invoices late and the value of late and disputed payments exceeds a staggering £220m. Contractors report extended delays, repeated chasing, administrative barriers and requests for payment deferrals, issues that directly weaken business resilience and increase financial risk across the sector. 

Commenting in the article, Iain McIlwee, Chief Executive of FIS, said the scale of the problem was “concerning”: 

“We have had contact with a number of companies reporting payment concerns associated with Vistry, blaming ‘administration problems’, ‘missed applications’ and the old ‘sorry, forgot to process your invoice’,” he said. “These are companies working across multiple sites that have incurred significant costs and are not being paid despite chasing multiple times.”

FIS is clear that treating the supply chain as a source of working capital is not sustainable. It undermines confidence, weakens delivery capacity and ultimately threatens the viability of housing programmes themselves. It also adds to mental health issues in the sector with more than four in ten specialist supplying the housebuilding sector feeling stressed about cashflow “most or all of the time”. 

As Government moves to tighten enforcement on late payment and improve payment transparency, FIS is calling for immediate improvements in commercial discipline, early engagement and realistic cost management to prevent financial pressure being passed downstream.

 The Telegraph investigation reinforces FIS’s long‑standing position: a credible and sustainable housing programme depends on a fair, well‑funded and promptly paid supply chain.

 Vistry have warned investors that rising construction costs could significantly undermine its financial position. Vistry has acknowledged that, under a “severe but plausible” scenario, continued cost inflation could result in it exceeding its committed borrowing facilities.

 As Government move to clamp down on poor payment, FIS is calling for a greater focus in procurement on commercial behaviour to prevent financial stress and risk being passed downstream.

 The Telegraph coverage reinforces FIS’s long‑standing position: a sustainable housing programme depends on a fair, well‑funded, and promptly paid supply chain.

 You can download the latest FIS Research on Procurement, Contracts and Payment Practices in the Housebuilding Supply Chain here. 

You can read the full article in the Telegraph here (subscription required).

 https://www.telegraph.co.uk/business/2026/04/05/iran-war-threatens-housebuilding-giant-with-fresh-trouble

The Construction Leadership Council (CLC) today published its biennial report, setting out its key priorities for 2026 and detailing the significant progress made during 2025 under each of the CLC’s four strategic pillars: building safety; net zero, resilience and circular economy; people and skills; and next generation delivery.

Over the past year highlights include:

• Establishing the Construction Skills Mission Board to support the delivery of the £625m Construction Skills Mission, and developing over 40 competency frameworks through the Industry Competence Steering Group;
• Working closely with the Building Safety Regulator, the Ministry of Housing, Communities and Local Government and the Health and Safety Executive to implement the Building Safety Act across the industry;
• Responding to the consultation on tackling late payment and to reform the practice of retentions;
• Growing the CO2nstructZero programme to involve over 300 companies;
• Continuing to embed the use of the Information Management Initiative Framework across the industry and Government.

As part of its 2026 strategy, the CLC has announced a major change in its strategic priorities. Following the successful launch of the Information Management Initiative in 2025, the ‘Next Generation Delivery’ priority has now been retired, and two new priority areas have been established: ‘Digitalising Planning and Building Control’ and ‘Business Model Reform’.

Isabel Coman, the Industry Sponsor for Next Generation Delivery, has stood done from her role, and two new Industry Sponsors will be appointed in the coming months. This will be alongside a formal process that will be run to appoint a new Deputy Co-Chair for the CLC.

Looking ahead, the CLC’s 2026 action plan focuses on delivering progress in relation to key issues for the industry. These include:

Net Zero, resilience & circular economy:

• CO2nstructZero: Align the CO2nstructZero Performance Framework and strategy with the Climate Change Committee’s 7th Climate Budget and embed it across industry.
• Green Construction Board: Enable and enhance procurement decisions to systematically identify and prioritise low-carbon solutions in infrastructure.
• Building safety: Working with industry and Government on the implementation of the Single Construction Regulator to ensure that the future regulation of the sector is effective and efficient.
• People and skills: Convene industry around the challenge of how we design and implement a digital skills passporting eco-system for the built environment.
• Digitalising planning and building control: Refocus the efforts of the workstream to prioritise progress on the digitalisation of the planning and building control systems, in partnership with MHCLG and wider industry stakeholders.
• Business model reform: Convene and facilitate engagement between the Government, key stakeholders and industry on recently announced legislative proposals to address late payments and abolish retention clauses in construction contracts.
• Health, Safety and Wellbeing: Publishing the Health, Safety and Wellbeing Action Plan in May 2026, followed by a Mental Health Action Plan and Joint Code of Practice in the summer providing advice to employers on creating a more supportive environment for employees.

In addition, work will continue under the digitalising planning and building control workstream to advance broader digital and data-led innovation across the sector — including the accelerated rollout of the CLC’s Information Management Initiative.

The report itself sets out detailed 2026 objectives and 2025 achievements for each of the CLC’s five core priorities and five industry working groups: Housing, Infrastructure, Domestic Repair, Maintenance and Improvement, Place, Commissioning and Assets and Health, Safety and Wellbeing.
The CLC will fully utilise its expanded board to maintain – and further strengthen – engagement with major Government departments that shape policy and outcomes for the industry.

Mark Reynolds CBE (Executive Chairman, Mace Group and CLC Co-Chair) said:

“The CLC’s latest report highlights a successful and productive 2025 but also recognises that significant work still lies ahead if the sector is to meet its long term ambitions.

“What remains unchanged is the critical importance of collaboration between Government, regulators and industry — and ensuring that organisations of every size are part of that effort.

“By working together, we can accelerate progress in 2026 on the issues that matter most, from improving skills, safety and wellbeing to enhance industry performance and helping Government to achieve its growth objectives for housing, infrastructure, retrofit and remediation.”

Chris McDonald MP (Industry Minister and CLC Co-Chair) said:

“This new report shows how vital the Construction Leadership Council’s work was to our construction sector in 2025, including establishing the new Mission Board to oversee £625m of skills investment, supporting delivery of the Building Safety Act, and growing CO2nstructZero to involve more than 300 companies.
“Construction is central to the UK’s growth and as Co-Chair of the CLC I’m proud to back its 2026 action plan, which will streamline regulation to boost productivity, improve health and safety for workers and double down on sustainability so the sector can play its part with our natural environment.”