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The Income Tax (Construction Industry Scheme) (Amendment) Regulations 2026: What Construction Businesses Need to Know

April 2026
Nadir Hasan and Karina Alibhai

The UK government has confirmed targeted amendments to the Construction Industry Scheme (“CIS”), set to come into force next week on 6 April 2026. The changes focus on simplifying administration and reducing erroneous penalties, rather than overhauling the core structure of CIS.

Two key reforms stand out:

  1. A new statutory exemption for payments made to public bodies; and
  2. A reinstated requirement for contractors to submit monthly NIL returns.

We discuss both below, along with what you should do now in order to prepare for the upcoming changes.

Exemption for payments made to public bodies

Regulation 2(3) inserts new regulation 23A (payments made to public bodies), which exempts certain payments made to a public body from the definition of a “contract payment” in section 60 of the Finance Act 2004.

Section 60 of the Finance Act 2004 defines “contract payment” as any payment which is made under a construction contract and is so made by the contractor to (a) the sub-contractor, (b) a person nominated by the sub-contractor or the contractor, or (c) a person nominated by a person who is a sub-contractor under another such contract relating to all or any of the construction operations.

Historically, contractors making payments to public bodies relied on an Extra Statutory Concession that treated these bodies as if they held Gross Payment Status. The new regulations formalise this position by ensuring that payments made to specified public bodies fall completely outside CIS.

From a practical perspective, this means:

  • No CIS deductions need to be applied when paying qualifying public bodies.
  • No CIS reporting obligations will apply to these payments.
  • Contractors working with central or local government will benefit from improved certainty and fewer administrative steps.

This will be particularly welcome for contractors engaged heavily in public‑sector infrastructure, housing or development frameworks.

Reinstatement of mandatory NIL returns

Regulation 2(2) inserts regulation 4(9A) and (9B) which require contractors, whose business includes construction operations, to make returns to His Majesty’s Revenue and Customs (“HMRC”) where the contractor has not made any payments to sub-contractors in a tax month (a nil return) unless the contractor notifies HMRC that they will make no payments for the tax month.

The obligation for contractors to file NIL returns, which was removed in 2015, will now be reinstated. HMRC found that its removal caused widespread confusion, leading to incorrect late‑filing penalties where contractors simply made no submission in months without subcontractor payments.

Under the new Regulation 4(9A)–(9B):

  • A NIL return must be submitted within 14 days of the end of any month in which no subcontractor payments were made.
  • The only exception is where the contractor has pre‑notified HMRC at least 14 days before the start of that tax month that no payments will be made.

What contractors, employers & suppliers should do now

With the changes going live on 6 April 2026, businesses should take the following steps:

  1. Review and update CIS processes
  • Ensure CIS software or outsourced payroll providers can automatically generate NIL returns.
  • Incorporate the 14‑day deadlines into compliance calendars.
  1. Map public‑sector clients
  • Identify clients who qualify as public bodies under the regulation.
  • Update internal guidance so teams stop applying deductions where they are no longer required.
  1. Strengthen record‑keeping
  • Maintain clear audit trails of months with no subcontractor payments.
  • Implement a process to notify HMRC in advance if a project is paused or no subcontractor spend is expected.
  1. Train staff
  • Make sure commercial, finance and site‑level teams understand when a NIL return is now required.
  • Ensure project managers know which contracts fall outside CIS.

Conclusion

The 2026 CIS amendments introduce targeted but meaningful changes. While the exemption for public‑body payments will streamline administration, the reinstated NIL‑return requirement places renewed responsibility on contractors. Preparing now will allow construction businesses to transition smoothly and avoid unnecessary compliance risk.

If you would like to understand how these developments may affect your projects, please contact Nadir Hasan or Karina Alibhai.

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