HMRC has confirmed that from 6 April 2026 mainstream contractors will have to file a CIS nil return for any tax month in which no payments are made to subcontractors, unless they have told HMRC at least 14 days before that month begins that no payments will be made. In practice, the return must be in no later than 14 days after the end of the tax month - the same timetable that underpins the usual 19th‑of‑the‑month CIS deadline. (gov.uk)

This is a material workflow change. Today, HMRC guidance says you do not have to submit a return for a no‑payment month provided you tell HMRC; some firms rely on an ‘inactivity’ flag to pause filings. From April, the filing burden shifts to either pre‑notifying before the month starts or submitting a nil return by the 19th after it ends. For SMEs with intermittent subcontractor use, that’s extra diary management and a higher risk of avoidable fines if admin slips. (gov.uk)

Scope matters. The nil‑return rule is targeted at contractors within section 59(1)(a) of Finance Act 2004 - businesses whose trade includes construction operations - rather than deemed contractors caught only by construction spend thresholds. If you are a builder, developer or M&E firm paying subs as part of day‑to‑day activity, you are in the front line of this change. (gov.uk)

Deadlines remain familiar but move earlier in the planning cycle. A UK tax month runs 6th to 5th; returns fall due by the 19th of the following month. If you will not pay any subcontractors in the first affected tax month (6 April to 5 May 2026) and want to avoid filing a nil return, you must tell HMRC by 23 March 2026. Otherwise, file a nil return by 19 May 2026. (gov.uk)

Penalty risk is explicit. HMRC’s consultation note confirms that failing to comply with the new nil‑return requirement will be subject to penalties. Under current CIS guidance, late monthly returns trigger £100 at one day late, £200 at two months, then £300 or 5% of CIS deductions at six and 12 months (whichever is higher), with further penalties possible for longer delays. Expect HMRC to align guidance with the new rule set. (gov.uk)

For finance teams, the operational ask is straightforward: move the decision point forward. If project schedules suggest no subs will be paid next month, log that decision and pre‑notify HMRC at least 14 days before the tax month begins; if there’s any doubt, plan to file a nil return by the 19th instead. Build this into weekly WIP reviews so it is not a last‑minute scramble.

Two side effects are worth flagging. First, repeat no‑payment months without pre‑notification will now each need an on‑time nil return; letting even one slip can stack penalties quickly across multiple months. Second, firms that previously rotated in‑house labour with occasional subbies will find their admin load becomes more consistent across the year, even when activity dips.

There is also a tidy‑up elsewhere in the rules. From April, payments made under a construction contract to public bodies listed in Finance Act 2004 section 59(1)(b)–(k) - including Crown departments, local authorities, housing bodies and NHS trusts - will not count as ‘contract payments’ for CIS. That exclusion should reduce edge‑case reporting where money flows to public bodies rather than to supply‑chain subcontractors. (gov.uk)

What to watch next: HMRC says a Tax Information and Impact Note will be published, and operational guidance will need to reconcile today’s message - that penalties can be cancelled where no payments were made - with the new mandatory nil‑return rule. Until that lands, conservative planning assumes penalties will bite if you miss the 19th without a valid pre‑notification. (gov.uk)

Bottom line for construction SMEs and their accountants: this is not a tax rise; it’s a scheduling and controls exercise. Set a monthly pre‑notification checkpoint, configure your software to generate nil returns on demand, and brief site managers that even a quiet month now carries a filing decision. Get that right and the new CIS rule will fade into the background rather than your P&L.