Opening
Tax liabilities arising under the Construction Industry Scheme frequently sit at the centre of financial distress in construction businesses.
Incorrect deductions, failures to verify subcontractors, loss of Gross Payment Status and historic arrears can escalate quickly into substantial exposures. When a company enters liquidation or other formal insolvency procedures, these matters are routinely scrutinised by liquidators and HM Revenue and Customs.
From April 2026, changes to the CIS regime increase the compliance stakes for contractors and subcontractors alike.
What CIS requires in broad terms
Contractors must verify subcontractors, apply correct deduction rates, submit monthly CIS returns, pay deducted sums and maintain records.
How CIS liabilities are treated in insolvency
Unpaid CIS deductions are treated as tax debts. Historic compliance is commonly examined when insolvency practitioners prepare statutory conduct reports.
The April 2026 CIS changes
Immediate removal of Gross Payment Status for fraud or serious non compliance, penalties up to 30 percent, five year reapplication restrictions, reintroduced nil return obligations and public body exemptions heighten risk.
High value scenario
A £6 million turnover contractor accrued £420,000 in CIS liabilities before entering liquidation, triggering scrutiny of director conduct.
Common pitfalls
Using deductions as working capital, ignoring correspondence and misunderstanding exposure.
Early action
Review returns, reconcile liabilities, correct errors and seek Time to Pay discussions promptly.
Closing
CIS liabilities play a central role in construction insolvencies and require proactive management.
Disclaimer
The information provided in this article is for general guidance and does not constitute legal advice. Each case is unique, and it is essential to consult with a qualified professional to discuss the specifics of your situation. Navigate Business Recovery Limited does not take responsibility for any actions taken based on the information provided here.
Contact: vee@navigatebr.com | 0330 236 9937
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