What’s changing in CIS compliance from April 2026?

Why were these changes introduced?

The 2025 Autumn Budget placed increased compliance requirements on those buying construction services that fall under the Construction Industry Scheme (CIS). Additionally, the proposed changes strengthened HMRC’s powers in respect of non-compliance. These changes come into force in April 2026 and will add reporting complexity and financial risk to construction supply chains.

How is CIS being aligned with VAT rules?

The main changes bring CIS in line with VAT: if HMRC can demonstrate that a business “knew or should have known” that it had been party to a transaction connected with fraudulent evasion of tax by a supplier, HMRC can:

• Immediately cancel the gross payment status of that taxpayer (NB the timeline to reapply has increased from one year to five years).
• Make the end user liable for the lost tax, even if they have settled the invoice in full, including the tax element.
• Apply a penalty of 30% of the lost tax chargeable to the business, directors and/or persons connected to the business.

Key risks for construction businesses

Losing gross payment status for five years would severely impact cash flow and operational flexibility, this makes proactive compliance business critical. Accordingly, CFOs and heads of tax must ensure their organisations are prepared for these changes to avoid reputational damage, financial penalties, and operational disruption.

How to prepare for CIS compliance changes

Saffery has a team of people who advise the real estate sector and are familiar with construction and development supply chains, the tax rules that apply to them, the processes and controls that manage risk and systems regularly used by housebuilders and developers, such as COINS, Microsoft Dynamics, Yardie, Rossum, Sage, Xero and Oracle.

Businesses need to refresh their due diligence and onboarding processes, as well as review supply chains to meet the “knew or should have known” standard set by HMRC. We have outlined a three-phase approach that enables organisations assess and, if required, improve their readiness by April.

Phase 1: Review your current approach

A review of your current onboarding and CIS compliance approach, including process documentation, training, use of technology and approach to continuous monitoring.

• Outputs: Red flag report against enhanced requirements active from April 2026; recommendations and action plan.
• Timeframe for completion: 1-2 weeks.

Phase 2: Vendors analysis

A Saffery developed risk profiling solution that evaluates subcontractor risk using criteria such as director history, company background, registration status and CIS compliance. Each factor carries a risk score to focus due diligence where it matters most. High-risk indicators trigger immediate scrutiny and support automated risk scoring.

• Outputs: Subcontractor risk register including score.
• Timeframe for completion: 1-4 weeks (depending on format of available data).

Phase 3: Process and controls improvement

Support with remediation of any weakness identified, including process changes, updating documentation and training, as well as aiding with technology adoption or implementation to minimise the risk that your organisation can demonstrate you had adequate processes to meet the “known or should have known” threshold set by HMRC.

• Outputs: Improved governance process.
• Timeframe for completion: 2+ weeks.

Technology-enabled CIS compliance

The changes announced in the Autumn Budget force more administration on companies. Adopting technology can support to reduce the manual nature of risk analysis associated with CIS compliance. Saffery can support you to optimise your existing software and support with specific technology tools:

• Review your current onboarding and ongoing monitoring of sub-contractors approach.
• Risk profile and assess subcontractor risk and improve compliance accuracy, including verifying against government-held data.
• Automated data extraction from logged data.
• Deploy OCR and AI to support with digitisation and validating compliance evidence.
• Compliance tracking using dashboards and predictive analytics for fraud detection and ongoing monitoring.

Technology can help transform CIS compliance from a manual, limited process into one that supports proactive risk management.

Risk profiling framework

A detailed risk profiling matrix evaluates subcontractor risk using criteria such as director history, company background, registration status, and CIS compliance. Each factor carries a risk score to focus due diligence where it matters most. High-risk indicators (eg charges against directors, frequent bank detail changes and a lack of VAT registration) trigger immediate scrutiny and support automated risk scoring.

Conclusion

CIS compliance is entering a new era of complexity and enforcement. For organisations, the imperative is clear: invest in technology-driven compliance solutions, refresh due diligence and onboarding processes, and ensure teams are trained and governance frameworks are in place. Proactive action will safeguard cash flow, reputation, and operational integrity in the face of evolving HMRC standards.

Saffery has extensive experience of CIS process reviews with large development and construction businesses and is working with clients on the April 2026 changes. If you’d like to discuss further, please speak to your usual Saffery contact or get in touch with Sean McGinness.