Why were these changes introduced?
The Autumn Budget 2025 introduced significantly enhanced compliance obligations for businesses purchasing construction services within the scope of the Construction Industry Scheme (CIS). At the same time, HMRC’s enforcement powers for non-compliance have been substantially strengthened.
These measures take effect from April 2026 and are expected to increase reporting complexity and financial risk across construction and development supply chains, particularly for end users and large contractors.
How is CIS being aligned with VAT rules?
The reforms bring CIS closer in line with existing VAT anti-fraud provisions. Where HMRC can demonstrate that a business “knew or should have known” that it was party to a transaction connected with the fraudulent evasion of tax by a supplier, HMRC will be able to:
Immediately cancel the taxpayer’s gross payment status
(The minimum period before re-application has increased from one year to five years.)
Transfer liability for the lost tax to the end user, even where invoices have been settled in full, including the tax element.
Apply a penalty of up to 30% of the lost tax, which may be levied on the business, its directors, or connected persons.
Key risks for construction businesses
The loss of gross payment status for five years could severely impact cash flow, supplier relationships, and operational flexibility. Proactive and demonstrable compliance is now a critical business requirement.
CFOs, finance directors, and heads of tax must ensure their organisations are prepared to avoid:
Significant financial exposure
Reputational damage
Operational disruption
Increased HMRC scrutiny
Preparing for the CIS compliance changes
JSB Accountants specialise in advising construction and development businesses on CIS compliance, VAT alignment, supply chain risk, and governance frameworks. They help organisations refresh due diligence, improve onboarding processes, and assess supply chain risk against the “knew or should have known” standard ahead of April 2026.
JSB Accountants recommend a three-phase approach to prepare businesses effectively.
Phase 1: Review your current approach
A detailed assessment of onboarding and CIS compliance processes, including documentation, staff training, technology use, and ongoing monitoring.
Outputs:
Red-flag report against April 2026 requirements
Prioritised recommendations and action plan
Timeframe: 1–2 weeks
Phase 2: Vendor analysis
A risk profiling solution that evaluates subcontractor risk using factors such as director history, company background, registration status, and CIS compliance. Weighted scoring ensures due diligence is focused where risk is greatest, with high-risk indicators triggering enhanced scrutiny.
Outputs:
Subcontractor risk register with risk scores
Timeframe: 1–4 weeks (depending on data availability)
Phase 3: Process and controls improvement
Support to remediate any identified weaknesses, including process redesign, updated documentation, staff training, and assistance with technology adoption. This ensures organisations can demonstrate robust processes and controls in line with HMRC expectations.
Outputs:
Strengthened governance and control framework
Timeframe: 2+ weeks
Technology-enabled CIS compliance
The April 2026 changes will increase administrative demands on construction businesses. Technology can help reduce manual effort while improving compliance accuracy and auditability.
JSB Accountants can assist organisations to:
Optimise subcontractor onboarding and monitoring processes
Automate risk profiling and CIS compliance checks, including verification against government-held data
Automate data extraction and validation of submitted documentation
Use OCR and AI to digitise and verify compliance evidence
Implement dashboards and predictive analytics for fraud detection and ongoing monitoring
Technology can transform CIS compliance from a reactive, manual process into a proactive risk management capability.
Risk profiling framework
A structured risk profiling matrix evaluates subcontractor risk across multiple criteria, including director history, company background, registration status, and CIS compliance. Weighted scoring ensures due diligence is proportionate and targeted.
High-risk indicators, such as charges against directors, frequent changes to bank details, or absence of VAT registration—trigger immediate escalation and enhanced review, supported by automated scoring.
Conclusion
CIS compliance is entering a new era of complexity and enforcement. Construction and development businesses should:
Refresh due diligence and onboarding processes
Strengthen governance and control frameworks
Adopt technology-enabled compliance solutions
Proactive action will help safeguard cash flow, protect reputation, and maintain operational resilience as HMRC’s expectations evolve.
JSB Accountants have extensive experience conducting CIS process reviews for construction and development businesses and are supporting clients to prepare for the April 2026 changes.
To discuss how these changes may affect your organisation, please contact JSB Accountants.
As a family-run company, we pride ourselves on providing a bespoke service tailored to your particular needs.
Above all, our objective is to save you time, money and effort in managing your accounts, leaving you free to focus on building your business.
Remember, you’re not alone, we’re always here to help if you have an accounts problem or query
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