HMRC has confirmed a small but important change to the Construction Industry Scheme (CIS), and it matters for the builders, subcontractors and construction firms that rely on the scheme every month.
From 6 April 2026, construction contractors will once again need to file a nil CIS return for any month when they have not paid subcontractors, unless they have told HMRC in advance that no such payments will be made. At the same time, payments made to local authorities and certain public bodies will be taken out of scope of CIS.
On paper, that sounds technical. In practice, it is the sort of admin detail that can trip up small firms, especially where one person is juggling quoting, payroll, invoicing and site work. For SMEs in construction, the safest reading is simple: if you are a contractor under CIS, make sure your monthly filing process is tidy before April starts.
What HMRC is changing
HMRC says the aim is to simplify and improve CIS administration. The two main changes are:
- payments to local authorities or public bodies will be exempt from CIS
- contractors must file a nil return for months with no subcontractor payments, unless HMRC has been told in advance that there will be no payments in that month
Both changes take effect from 6 April 2026.
The nil return point is the one most small contractors should focus on. HMRC removed the nil filing requirement in 2015, but says that did not reduce admin burdens in the way intended. Instead, it led to confusion and, in some cases, penalty debt linked to missed or misunderstood reporting obligations.
Why this matters to small construction firms
For many smaller contractors, CIS is handled in the background until something goes wrong. That is exactly why this update matters. If your business has quiet months, pauses between jobs, or periods where you use labour differently, it is easy to assume “nothing happened” means “nothing needs filing”. From April, that assumption could become expensive.
The change is especially relevant for trades firms that move in and out of subcontractor use depending on workload. A builder might use subcontract labour heavily on one project, then rely on directly employed staff or owner-managed work the next month. Under the updated rules, that stop-start pattern needs to be reflected properly in monthly CIS admin.
It also matters for growing firms. Once admin starts slipping, it tends to slip quietly. A missed nil return can turn into penalties, time spent appealing, and avoidable friction with HMRC. For a small business, that is effort better spent on quoting, scheduling and cash collection.
If your business is already preparing for other HMRC changes this year, this is worth adding to the checklist alongside Making Tax Digital preparation for income tax. They are different regimes, but the lesson is similar: practical compliance work is becoming more process-driven, and smaller firms need clearer routines rather than last-minute fixes.
The public body exemption is helpful, but narrower
The second change removes payments made to local authorities and certain public bodies from the scope of CIS. HMRC says these bodies were not really the intended target of the scheme, and the change replaces an older concessionary workaround.
That is sensible tidying-up, but for most smaller contractors the bigger day-to-day issue will still be nil returns. The exemption may simplify payment handling on some public-sector work, but it will not remove the need for many construction SMEs to stay on top of contractor obligations generally.
What small businesses should do now
First, check whether you are acting as a contractor under CIS, even if construction is not the only thing your business does. HMRC’s guide makes clear that the rules can also apply to some businesses outside traditional building firms if their construction spending crosses the relevant threshold.
Second, review who is responsible for monthly CIS returns. If it sits with a bookkeeper, accountant, payroll provider or office manager, make sure they know the nil return requirement is coming back from 6 April.
Third, tighten the handover between operations and admin. Someone in the business should be able to answer a simple monthly question: did we pay any subcontractors this month, yes or no? If the answer is no, the filing decision still needs to be made and recorded.
Fourth, do not wait for the first penalty notice before fixing your process. A simple recurring reminder, checklist or payroll calendar entry may be enough to prevent hassle later.
The practical takeaway
This is not a dramatic tax overhaul. It is a modest rule change with very ordinary consequences: better records, cleaner monthly admin, and less room for confusion. But those “ordinary” details matter in construction, where paperwork often trails behind the real work on site.
For UK construction SMEs, the message is straightforward. Before the new tax year begins, make sure your CIS process covers quiet months as well as busy ones. A nil month will still need attention.
Sources
- HMRC policy paper, Simplifying and improving Construction Industry Scheme administration, published 13 March 2026
- HMRC consultation, Construction Industry Scheme proposed simplification and administrative amendments, published 6 January 2026
- HMRC guidance, Construction Industry Scheme: a guide for contractors and subcontractors (CIS 340)
