HMRC has increased compliance checks resulting in fines of £15bn

HMRC is clamping down on CIS fraud, placing greater responsibility on contractors to understand exactly who they are doing business with.

From April 2026, HMRC's "knew or should have known" rules mean businesses can be held liable for tax losses elsewhere in their labour supply chain if they failed to spot warning signs of fraud or deliberate non-compliance. This represents a significant shift away from simply checking that CIS obligations have been met, to expecting contractors to carry out robust due diligence on labour providers, payroll companies and subcontractors.

HMRC now has the power to remove Gross Payment Status, recover unpaid tax and National Insurance from businesses further up the supply chain, and issue substantial financial penalties where it believes a contractor should have identified the risks. Warning signs include unusually low labour costs, complex subcontracting arrangements, frequent changes in labour providers and payroll companies with little or no trading history.

For contractors, this means supply chain assurance is no longer just good business practice, it is an essential part of managing tax risk.

Simon Brookes, Managing Director at Mineral Payroll, said: "Transparency and compliance are at the heart of our payroll services. We work closely with contractors and recruitment partners to ensure workers are engaged correctly, CIS obligations are met, and payroll processes are fully compliant with HMRC requirements. By providing clear audit trails, robust compliance checks and experienced payroll support, we help businesses reduce the risks associated with increasingly complex labour supply chains.

"As HMRC continues to strengthen its focus on labour fraud, choosing a trusted payroll partner can provide confidence that your workforce is being paid correctly while helping to protect your business from unnecessary tax exposure."