Build CIS supply-chain due-diligence packs for UK construction contractors
From 6 April 2026, HMRC can strip your Gross Payment Status for five years if you ‘should have known’ a subbie was dodgy. £20/month proves you checked.
Executive Summary
In a nutshell
From 6 April 2026 HMRC has new powers under the reformed Construction Industry Scheme. If a contractor ‘knew or should have known’ a payment in their supply chain was linked to fraud, HMRC can immediately revoke Gross Payment Status (now a five-year ban, up from one), assess the contractor for the unpaid tax, and stack personal penalties of up to 30% on directors. The defence is documented due diligence. This product is a £15–30/month tool that automates the four checks every contractor must run before the first payment of each tax year (Companies House status, HMRC UTR + CIS verification, VAT registration, prior labour-history pattern check) and produces a one-page timestamped PDF pack per subbie that a contractor can wave at HMRC. It also handles the now-mandatory monthly NIL returns. The buyer is the small main contractor with 1–50 subbies a year who has no compliance team and a lot to lose.
The Story
Meet the user
Mark runs a small groundworks outfit in Reading. Twenty-two subbies last year, all sole traders or single-director limiteds, most of them found through word of mouth on sites or through the Federation of Master Builders WhatsApp. For years his ‘verification process’ was a phone call to HMRC’s CIS line, the UTR jotted on a paper form, and a handshake. Then his accountant forwards him an RSM newsletter in April: from the 6th, HMRC can strip his Gross Payment Status for five years if any subbie down the chain turns out to be a mini-umbrella fraud. Mark looks at his last invoice run, twelve names, and realises he has no idea whether half of them are still trading, still VAT-registered, or still who they said they were.
He tries to do it by hand. Forty-five minutes per subbie clicking between the HMRC CIS portal, Companies House, the VAT checker on gov.uk, and a Google search for any prior insolvency hits. At twenty-two subbies that is the best part of two days of admin he does not have. Then he sees a thread in the Construction Business Owners UK group: someone is using a tool called SubbieGuard, £24 a month, that runs all four checks in one click, files the monthly NIL return on his behalf, and emails him a stamped PDF pack per subbie that he can drop straight in a shared drive. He signs up that night.
Scores
How does this idea stack up?
7.4/10
~370,000 VAT/PAYE-registered UK construction firms (ONS Q3 2024). Tens of thousands fit the small-contractor profile that has 1–50 subbies a year and no compliance team. Niche but well-defined and well-funded.
Five-year Gross Payment Status loss can put a contractor out of business overnight. 30% personal penalties on directors. RSM, BDO, Hudson Contract and CIPP are actively warning clients. Existing tools focus on filings, not on the new ‘should have known’ defence.
All required APIs exist and are free: HMRC CIS Deductions (MTD), HMRC VAT Number Check, Companies House, and Insolvency Service. The work is integration, PDF generation, and a monthly scheduler. 4–6 weeks for a solo full-stack dev.
Regulation went live 6 April 2026. Search volume for ‘cis subcontractor verification’ up ~24% YoY (Apr 25: 210 → Apr 26: 260). Accountant blog content peaking now. The first GPS revocation case will trigger a flood of demand.
Statutory obligation is permanent, but the ‘buy now’ urgency is event-driven. Xero and Sage will bundle within 18–24 months; HMRC’s CIS portal could absorb parts over 3–5 years. Build the accountant-dashboard moat early.
Four API integrations, OAuth for agent authorisation, scheduled jobs, PDF generation, transactional email, evidence-pack legal layer. Solo-buildable but not a one-weekender. ~£500–£800 launch budget.
Strongest
Pain
Losing GPS for five years is not a fine, it is an extinction-level event for a small contractor. People will pay £20–£30/month to make that risk go away, the same way they pay for liability insurance.
Watch out
Durability
The 18–24 month window before Xero or Sage bundle this is the realistic moat. Either land 1,000+ contractors via accountant partnerships in that window, or position to be acquired.
Pain Point
The problem
“If HMRC establishes a fraud link, the business may be assessed for the tax that was evaded. Even contractors who complied with their obligations could end up paying a subcontractor’s unpaid income tax and National Insurance. HMRC can charge a penalty of up to 30% of the lost tax to the business and, importantly, to its directors and other connected parties.”
— paraphrased from RSM UK Tax Voice, April 2026
From 6 April 2026 the CIS regime added a new and asymmetric standard of liability. Previously, a contractor who verified a subbie with HMRC and deducted the right amount had done their job. From this April, the defence is no longer ‘I verified them,’ it is ‘I checked the integrity of the entire supply chain, and here is the evidence.’ The ‘knew or should have known’ test is deliberately objective: HMRC asks what a reasonable business in the same position should have spotted, not what the contractor actually did.
If HMRC decides the contractor should have known, the consequences stack: immediate Gross Payment Status revocation with a five-year ban (up from one year); tax assessment for unpaid tax in the chain (up to 20% of payments made); personal penalties of up to 30% of the assessment against both the company and its directors; and the now-mandatory monthly NIL return, which fires an automated £100 penalty if missed, escalating to £300+ at six months.
The HMRC guidance is explicit that the defence is ‘robust, documented due diligence’. That means timestamped evidence of: Companies House status, HMRC CIS verification, VAT registration check, and a basic risk assessment (any insolvency history? Trading less than 12 months? Suspicious pricing?). At present, nobody packages this into a single workflow for the small-contractor market.
The pain is fourfold: information overload (four government sites, four logins, four output formats); time cost (30–60 minutes per subbie per tax year, a full day every April at 20 subbies); no defensible record (screenshots in a folder are not a contemporaneous audit trail; HMRC will want timestamped, signed evidence); and asymmetric downside (£100 NIL-return penalties are an annoyance, five-year GPS revocation is the business).
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