HMRC has launched a technical consultation on CIS changes, covering exemptions for public body payments and new nil return rules, open until 3 February 2026.
The UK tax authority, HM Revenue & Customs (HMRC), has launched a technical consultation on draft regulations to simplify the Construction Industry Scheme (CIS).
The consultation, opened on 6 January 2026, covers exemptions for payments to public bodies and new rules on nil returns.
Consultation overview
The government announced at the Autumn Budget 2025 that it would conduct a technical consultation on secondary legislative changes to update and simplify the CIS, with the regulations set to take effect from 6 April 2026.
The draft regulations propose 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 no payments will be made that month.
The government is seeking technical feedback to ensure the regulations work as intended and to identify areas needing further clarification in more detailed guidance.
Exempting payments to public bodies
The CIS requires contractors to make deductions from payments to subcontractors and report and pay these to HMRC, unless the subcontractor has Gross Payment Status.
Previously, HMRC allowed certain public bodies to be treated as having Gross Payment Status under an Extra Statutory Concession, so they could receive payments without deductions.
The draft legislation introduces Regulation 24ZA (payments made to public bodies), which allows this concession to be removed. The new regulation formally exempts payments to specified public bodies from the CIS, meaning no deductions are required.
Requiring construction contractors to file nil returns
The requirement to file nil returns was removed in 2015, but its removal did not reduce administrative burdens and caused incorrect late filing penalties.
The draft legislation amends Regulation 4 of the CIS Regulations, which specifies what must be included in a contractor’s monthly return. The proposed changes:
- Reinstate the requirement for contractors who have made payments reportable under the CIS to file nil returns when no payments were made, unless they have notified HMRC.
- Contractors who fail to either file a nil return or notify HMRC will be liable to a penalty.
Previously, contractors had to voluntarily inform HMRC to prevent erroneous penalties. While most filed nil returns or appealed penalties, some did neither, leading to significant penalty debt that was often not justified.
The consultation period will end on 3 February 2026, and feedback can be submitted via email to cisconsultations@hmrc.gov.uk.
