Proposed simplification and administrative amendments
The Government announced in the Autumn Budget 2025 a technical consultation on secondary legislative changes to update and simplify the Construction Industry Scheme (CIS), coming into force from 6 April 2026.
The Government intends to amend the Income Tax (Construction Industry Scheme) Regulations 2005 (‘the CIS Regulations’) to:
- exempt payments made to local authorities or public bodies from the scope of the CIS
- require construction contractors to file a nil return when they have not paid any subcontractors in a month, unless they have notified HMRC in advance that they will not make any such payments that month
From 6 January to 3 February 2026 the Government is seeking technical feedback on the draft regulations, both to ensure that they operate as the government intended, and to identify areas which need further clarification in more detailed guidance. More details can be found here.
Members of AREF's Tax Committee are contributing to a response from BPF to this consultation.
Revision to Income Tax (Construction Industry Scheme) Regulations
Following the technical consultation on proposed amendments to the Construction Industry Scheme (CIS) (see below), on 8 March 2024, the Government published a revision to the Income Tax (Construction Industry Scheme) Regulations to:
- make sure minor VAT compliance failures will not result in gross payment status refusal or removal
- remove most payments made by landlords to tenants from the scope of the CIS
These come into effect from 6 April 2024.
Technical consultation
In December 2023, the Government published a technical consultation on proposed amendments to the Construction Industry Scheme (CIS). This set out the following legislative changes as announced in the Autumn Statement (see below):
- Minor VAT compliance failures, relating to the circumstances in which Gross Payment Status (GPS) would not be lost, following the amendment (in the Finance Bill) to take VAT compliance failures into account in the conditions for obtaining or retaining GPS.
- Landlord/tenant payments, intended to remove most payments by landlords to tenants from the scope of CIS.
With the assistance of the Tax Committee, AREF submitted a response on 9 January 2024.
Response to consultation on reforms to the Construction Industry scheme
On 22 November 2023, as part of the Autumn Statement, the Government published a response to its consultation (see below) on CIS reform. The Government confirmed that it will:
-
add compliance with Value Added Tax (VAT) obligations to the Gross Payment Status (GPS) compliance test, with corresponding regulations setting out exceptions to VAT compliance obligations
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expand the grounds for immediate cancellation of GPS. VAT, Income Tax Self Assessment (ITSA), Corporation Tax Self Assessment (CTSA) and Pay As You Earn (PAYE) will be added to the taxes where HMRC is able to immediately cancel GPS if they have reasonable grounds to suspect that the GPS holder has fraudulently provided an incorrect return or information
-
introduce regulations to remove the majority of payments from landlords to tenants from the scope of the CIS
The legislative changes will come into force from 6 April 2024.
Consultation on reforms to Construction Industry Scheme
On 27 April 2023, HM Revenue & Customs (HMRC) published a consultation: Construction Industry Scheme (CIS) reform. AREF submitted its response to this consultation on 20 July 2023.
This consultation considered whether it would be appropriate to add VAT to the list of taxes HMRC must consider when undertaking the statutory compliance test for receiving or keeping Gross Payment Status (GPS). It sought views on how adding VAT could be given effect and the consequences for those affected.
In addition, the consultation looked at two areas where there is unnecessary administrative burden when operating the CIS: landlord/tenant payments; and multiple reporting requirements by some groups. It sought views on the scope and impact of these burdens, and the government's proposals for removing or reducing them. It also invited views on whether there are other areas of the CIS causing unnecessary administrative burden.
AREF's response to the consultation was overseen by AREF's Tax Committee.
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