From 6 April 2026, HMRC can remove Gross Payment Status (GPS) from a business with immediate effect where it determines that a payment was made or received knowing — or where the business should have known — that it was connected to fraudulent CIS activity. The Finance Bill 2026 has fundamentally altered the risk profile of CIS supply chain relationships.
For construction businesses and payroll providers, this is not a marginal adjustment. It is a direct exposure to a penalty structure that could, in the worst cases, be business-ending.
What Changes on 6 April 2026
Immediate GPS removal. Under current rules, GPS withdrawal follows a defined process. From 6 April, HMRC can act with immediate effect where the fraud connection threshold is met. (Finance Bill 2026; Rouse Partners; Saffery)
Reapplication ban extended to five years. A business losing GPS currently faces a one-year ban on reapplication. From 6 April, that ban extends to five years. For a subcontractor operating without GPS, this means 20–30% withheld from every payment received for up to five years. For smaller businesses with tight margins, this is a potentially existential cash flow burden.
Financial penalties of up to 30%. In addition to recovering the full associated tax loss, HMRC can impose a financial penalty of up to 30% on the business and/or its officers. (Rouse Partners; Acenteus; Saffery)
Nil returns reinstated. Contractors must once again submit monthly CIS nil returns when no subcontractor payments are made in a given month. Late filing penalties apply. This is an administrative requirement, but one with real financial consequences for non-compliance.
Public sector exemption. Payments made to local authorities and certain qualifying public sector bodies are fully exempt from CIS — a targeted but important carve-out.
The “Should Have Known” Standard
These powers were introduced following proposals in the Autumn Budget 2025, in direct response to persistent CIS fraud in the construction sector. (Construction News) The legislation targets businesses that knew, or should have known, their supply chain was connected to fraudulent activity.
That “should have known” standard is the crux. Ignorance of a subcontractor’s GPS status, or of the provenance of CIS payments flowing through the supply chain, is not a defence — it is evidence of inadequate due diligence.
Firms that cannot demonstrate active, documented verification of their subcontractor relationships are exposed. The GPS status confirmation, the verification record, the audit trail of supplier checks: these are no longer optional governance improvements. They are the evidence a business would need to mount a defence.
Build Your Audit Trail Before April
With 6 April 2026 imminent, the practical steps are clear: conduct GPS verification checks on subcontractors, document those checks formally, and review any CIS payment arrangements that have not been subject to proper scrutiny. A centralised record of due diligence activity is considerably easier to produce before an investigation begins than after.
[Explore CIS Compliance Resources on Diligence Hub →]
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