The government has confirmed significant changes to the Construction Industry Scheme (CIS), coming into effect from 6th April 2026. The changes, designed to clamp down on fraud and improve compliance, will have major implications for both main contractors and subcontractors across the construction sector. We spoke to our construction specialist Marc Bishop, to understand what these reforms mean for the industry as a whole, and the impact they might have for businesses in the future.
From April, HMRC will gain new powers to take immediate action where a business makes or receives a payment that it knew, or should have known, was connected to fraudulent activity. This means HMRC will be able to:
“This is a clear shift from retrospective enforcement to real-time accountability,” said Marc Bishop, Senior Business Development Manager at Red Flag Alert.“The message is simple: HMRC expects construction businesses to know their supply chain inside out.”
For many subcontractors, maintaining Gross Payment Status is vital. Losing it overnight can cause immediate cash flow disruption, as payments that were formerly paid in full could suddenly face 20% deductions. Beyond that, the reputational and operational consequences could be severe.
“The words ‘knew or should have known’ raise the stakes,” explains Marc. “Subcontractors aren’t just responsible for their own compliance anymore. They need to prove they’ve taken reasonable steps to avoid being connected to fraudulent activity.”
To prepare, subcontractors should:
For main contractors, the risk is equally significant. Under existing CIS rules, contractors are responsible for checking subcontractors’ tax status, applying the right deductions, and submitting returns to HMRC. Under the new framework, those obligations become riskier: continuing to work with a fraudulent subcontractor could lead to penalties or loss of reputation, even if the contractor wasn’t directly involved.
“The days of yearly reviews or static credit reports are over,” says Marc Bishop “HMRC have made their stance very clear, and continuous monitoring of your supply chain is now expected, no excuses.”
Bishop advises main contractors to move from reactive checks to ongoing due diligence and to document every step they take to manage risk exposure.
The government is also making some administrative simplifications. Payments to local authorities and certain public bodies will be exempt, and contractors will no longer have to submit nil returns. While this reduces some paperwork, it doesn’t ease the compliance burden or the risks associated with subcontractor payments.
As Bishop points out, “These changes are positive, but they don’t remove the heavy responsibility contractors have for ensuring the integrity of their supply chains.”
April 2026 might sound far away, but preparation needs to start today. CIS compliance is evolving into a more complex and rigorously enforced landscape, and in order to meet their future requirements, companies should set the wheels in motion and act now. By modernising their ongoing and future supply chain checks, visibility across all contractors and subcontractors will be vastly improved. An investment in technology-driven compliance and onboarding by embedding live monitoring, will protect not only their GPS but also their financial stability and reputation. HMRC standards are becoming more stringent, and proactive action isneeded to safeguard cashflow and operational integrity in an already tumultuous market.
“HMRC has made its position clear,” adds Marc Bishop. “Not knowing will no longer be a defence. Whether you’re a main contractor safeguarding your supply chain or a subcontractor protecting your status, it's important to act now to avoid the consequences.”
In this environment, visibility and speed of action will be key. Red Flag Alert provides live business intelligence that enables construction companies to:
“Real-time intelligence isn’t a nice-to-have anymore,” says Marc. “It’s what proves you’ve taken reasonable, responsible steps to protect your business.”
Want to understand what risk looks like in your supply chain today, not six months from now? Get in touch with Red Flag Alert for a demonstration of how real-time monitoring can protect your business ahead of the April 2026 CIS changes.
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