23 March 2026
The government has confirmed that from 6 April 2026, contractors operating under the Construction Industry Scheme (CIS) will once again be legally required to submit the monthly CIS return, even when no subcontractors have been paid.
The change, first announced in the Autumn Budget 2025, means contractors must either file a monthly CIS return, including nil returns where no subcontractor payments have been made, or notify HMRC in advance of any month in which they will not pay subcontractors by submitting an inactivity request.
The requirement to file nil returns was removed in 2015 in an attempt to reduce administrative burdens. Contractors were instead asked to notify HMRC of the periods of inactivity or voluntarily submit a nil return. Many failed to keep HMRC updated and this led to escalating late filing penalties and a significant volume of appeals. This proved time-consuming for both contractors and HMRC, prompting them to suspend all CIS late filing penalties except for the initial fixed penalty of £100.
With the reintroduction of compulsory nil returns, HMRC will retore the full CIS late filing penalty regime. They have confirmed that the change is intended to promote consistent compliance across the sector and reduce the need for prolonged penalty appeals in future.
The penalty framework will return to the following structure:
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£100 fixed penalty for missing the filing deadline
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£200 fixed penalty once the return is two months late
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£300 or 5% of any liability that should have been declared once the return is six months late
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A further penalty dependent on the reason and circumstances that could be another £300 or 5% of any liability that should have been declared.
Also from 6 April 2026, payments made to local authorities and certain public sector bodies will be fully exempt from CIS. This replaces an old concession by introducing a new regulation (Regulation 24ZA) of The Income Tax (Construction Industry Scheme) Regulations 2005 that removes any unnecessary CIS deductions and reporting on public-sector contracts.
These changes form part of the CIS reforms announced in the Autumn Budget 2025, which also includes anti-fraud measures to target businesses who knew (or should have been aware) that they were engaging in supply chain tax evasion.
It is important that all employers involved in the construction sector are aware of these upcoming changes to avoid any unnecessary penalties or compliance intervention. HMRC has emphasised that submitting nil returns is a quick and simple process, and those who previously were voluntarily filing these returns are unlikely to see little practical change.
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