HMRC Expands CIS Fraud Powers Beyond Direct Offenders

Rowan Ashford

Published: April 7, 2026 4:33 AM ET

HMRC Expands CIS Fraud Powers Beyond Direct Offenders

The recent changes enacted on April 6 mark a significant overhaul in the Construction Industry Scheme (CIS) compliance framework. These adjustments by HM Revenue & Customs (HMRC) extend liability beyond companies directly engaged in fraudulent activities. The new regulations enable HMRC to revoke gross payment status from businesses and hold directors personally accountable for tax losses linked to fraudulent actions throughout their supply chains.

Overview of the New CIS Regulations

The reformed CIS compliance regulations, which are modeled after effective VAT countermeasures, aim to combat supply chain fraud more effectively. Under this new regime, the focus shifts toward enhancing supply chain accountability.

Key Changes in Liability

HMRC can now strip businesses of gross payment status.
Directors may face personal liability if they “knew or should have known” about fraud in their supply chains.
Contractors can lose gross payment status for a minimum of five years.
Personal penalties for contractors can reach up to 30% of the tax evaded.

Expected Financial Impact

The Treasury anticipates that these stringent measures will generate approximately £205 million in the first year. With enforcement shifting towards a more proactive approach, companies must thoroughly manage their supply chains to mitigate risks of fraud.

Expert Insight

Jack Sloggett, a director at Tax Radar, emphasized the magnitude of these changes. He stated, “This is the most significant change to CIS compliance in twenty years.” The regulations now place the onus on contractors to actively monitor their supply chains rather than depending on infrequent audits.

Importance of Compliance and Vigilance

Bearing in mind the new responsibilities, firms must take these reforms seriously. HMRC’s increased scrutiny means businesses have less margin for error when it comes to supply chain oversight. Failure to comply could lead to severe financial repercussions, including loss of gross payment status and substantial personal fines.

In summary, the expansion of CIS fraud powers by HMRC heralds a transformative period for contractors, compelling them to ensure vigilance within their operations to avoid significant penalties. As the landscape of compliance changes, proactive management of supply chain relationships is now more critical than ever.