Compliance
Tax Compliance Strategy: HMRC’s Increased Focus on Employer and Construction Industry Fraud from April 2026
With recent UK announcements, businesses in construction and employers generally need to prepare for new compliance tools and penalties coming April 2026—this article helps you stay ahead.
By NomadicTax Research Team • 5-8 min read • February 18, 2026
## What’s New for Employers and Construction Sector
The UK Budget 2025 and HMRC publications have introduced changes to tackle fraud, particularly within the Construction Industry Scheme (CIS). From 6 April 2026:
- HMRC will have power to *remove** Gross Payment Status (GPS) **immediately** where payments are known or should have been known to be connected to fraud.
- Businesses or officers may face penalties up to **30%** of tax involved under certain conditions, especially for businesses part of fraud or failing to prevent it.
- Nil-filing obligations will be reinstated for certain construction contractors. These are contractors who have gross payments but below thresholds but must still file even if income is nil. ([gov.uk](https://www.gov.uk/government/publications/budget-2025-overview-of-tax-legislation-and-rates-ootlar/budget-2025-overview-of-tax-legislation-and-rates-ootlar?utm_source=openai))
## Who Needs to Care
- Construction contractors who currently benefit from GPS
- Employers using umbrella companies or indirectly engaging in subcontracted work
- Officers of corporate entities involved in payments potentially tied to tax-fraud risk
- Payroll teams and compliance officers needing to tighten internal controls
## Action Steps to Remain Compliant
1. **Review your Gross Payment Status**
- If your business pays or receives payments through CIS with GPS, evaluate whether any payments could be judged as having a connection to fraud. Clear documentation is important.
2. **Strengthen internal control systems**
- Contracting agreements, due diligence on subcontractors, verifying compliance status of partners.
3. **Ensure proper filing even if income is minimal**
- Don’t assume nil income means no filing; ensure your systems can file nil returns to avoid penalties.
4. **Monitor for guidance and adjust payroll practices**
- HMRC will likely issue more detailed regulations; ensure payroll software, terms of payment, reports are updated by April 2026.
5. **Budget for possible cost of non-compliance**
- Penalties can be steep. Businesses should run risk assessments, set aside funds or assure insurance where possible.
## Practical Examples
- **Contractor A**: A small construction firm subcontracting via GPS discovers that one payment was made to a firm later deemed fraudulent. Helicopter documentation is missing. Under new rules, GPS could be revoked immediately, and a 30% penalty might be applied retroactively.
- **Umbrella Company B**: Temp workers are engaged via umbrella companies. HMRC may target payments that are structured in a way that avoids detection. Employers should ensure transparency and avoid opaque schemes.
## Summary
April 2026 brings heightened compliance risk for construction contractors and employers. Changes to GPS removal, nil filing obligations, and stricter penalties demand immediate review of payments processes and stronger due diligence. Don’t wait—start assessing risk and updating systems now.