Crackdown on Tax Avoidance in Construction Management Sector 

HMRC is escalating its fight against avoidance in July 2025. The pressure falls squarely on tax avoidance in the construction management sector. Draft rules target promoters, with universal stop notices and tougher sanctions. AI tools and larger compliance teams raise the chance of checks. CIS, IR35, and VAT processes face closer review. This article outlines the changes, highlights risk hotspots, and sets out practical steps to stay compliant. Apex Accountants provides clear guidance tailored to construction managers.

Background: 

HM Revenue & Customs (HMRC) is tightening its grip on tax avoidance. On 21 July 2025—the UK’s “Legislation Day”—the government released draft legislation targeting promoters of marketed tax‑avoidance schemes. The proposals would criminalise failing to notify HMRC about such arrangements and introduce universal stop notices and promoter action notices to prevent marketing of these schemes. HMRC’s Transformation Roadmap emphasises closing the tax gap with technology and artificial intelligence (AI), and the authority has already confirmed it uses AI to monitor data and detect unusual patterns.

HMRC is increasing capacity with £1.6 billion. This will fund 5,000 extra compliance officers and 1,800 debt-management officers. The staffing increase represents a 10% uplift. AI and data analytics will help flag suspicious patterns. Whistleblower incentives will encourage reporting of avoidance schemes. For construction management companies, these changes signal a tougher compliance environment.

Why construction managers should pay attention

Construction projects often involve multiple subcontractors, temporary workers, and complex supply chains. This complexity makes the sector attractive to promoters of aggressive tax schemes—such as misclassified off‑payroll arrangements or artificial employer structures. HMRC’s expansion of compliance teams means more scrutiny. Universal stop notices could ban entire categories of schemes, while promotion action notices may require banks, agencies, and advertisers to stop servicing promoters. Phoenix schemes that relaunch under new names will no longer escape attention. Therefore, construction managers must ensure their tax planning is robust, transparent, and defensible.

Key features of the July 2025 crackdown

The July 2025 announcements comprise several measures designed to dismantle tax‑avoidance schemes and empower HMRC:

• Tighter legislation: Finance Bill 2025‑26 drafts make it a criminal offence for promoters to fail to notify HMRC about avoidance arrangements. Universal stop notices and promoter action notices would allow HMRC to prohibit the promotion of described schemes and impose penalties or criminal sanctions.
• Expanded compliance workforce: HMRC will recruit 5,000 additional compliance officers and 1,800 debt-management officers, increasing the likelihood of checks and the pursuit of unpaid taxes.
• Use of AI and data analytics: HMRC is investing in advanced data analytics and AI to identify unusual patterns and red flags. Its Transformation Roadmap explicitly calls for harnessing AI’s potential, and blogs explain that AI will uncover issues previously missed.
• Universal stop notices: Current stop notices target specific promoters; universal stop notices would ban any scheme matching a description. Sanctions include publishing promoter details, fines and up to two years’ imprisonment.
• Promoter action notices: These notices will compel intermediaries—banks, employment agencies, advertisers—to stop providing services to promoters, disrupting the supply chains that support avoidance schemes.
• New information powers: HMRC proposes connected‑party information notices and promoter financial institution notices to obtain details about avoidance schemes and connected parties.

HMRC tax avoidance list

HMRC maintains and regularly updates a tax avoidance list. This public list names schemes and promoters that the tax authority believes to be non-compliant. Being associated with anything on this list can damage a company’s reputation and invite detailed enquiries. 

For construction management companies, it is important to check the HMRC tax avoidance list before engaging with advisers or intermediaries. Working with a supplier, umbrella company, or payroll agency associated with schemes on the list could expose your business to penalties. Using the list as a reference point when conducting due diligence helps construction managers steer clear of high-risk arrangements and maintain transparency in their tax affairs.

Are tax avoidance schemes legal

A common question is: are tax avoidance schemes legal? Technically, many marketed schemes operate within the letter of the law. However, HMRC challenges such arrangements if they exploit loopholes or lack genuine commercial substance. While tax avoidance is different from tax evasion—which is outright illegal—the line is thin, and the risks are significant. 

Construction managers who participate in schemes later deemed abusive may face backdated tax bills, penalties and interest. HMRC’s July 2025 crackdown demonstrates that legality is not a safeguard; even if a scheme appears lawful, it can still be investigated and shut down. The safest approach is to rely on genuine tax planning strategies, supported by professional advice, rather than schemes designed to artificially reduce liabilities.

Practical compliance tips for construction management companies

1. Seek professional advice: A qualified tax adviser can clarify the line between legitimate tax planning and avoidance and help you comply with Construction Industry Scheme (CIS) rules, IR35 off-payroll regulations, and VAT reverse charge rules.
   
2. Avoid aggressive tax planning: schemes promising large tax savings through complex structures attract HMRC’s attention, and users are rarely shielded from liability. Ensure any planning has genuine commercial substance.
   
3. Keep thorough records: with AI-driven analysis, anomalies are more likely to be flagged. Maintain accurate, digital records of subcontractors’ payments, labour costs, CIS deductions, VAT invoices, and payroll data. Digital record-keeping also prepares you for Making Tax Digital (MTD) requirements.
   
4. Verify subcontractor status: Under CIS, contractors must verify subcontractors and deduct the correct tax. Misclassification can lead to penalties. Document the terms of engagement to show whether workers are genuinely self‑employed.
   
5. Train staff and monitor supply chains:Educate project managers and finance teams to spot and reject avoidance schemes—especially those promoted via umbrella companies or marketing agencies. Please ensure thorough due diligence is conducted on intermediaries, and if a supplier receives a promoter action notice, kindly discontinue engagement promptly.
   
6. Embrace transparency: HMRC is investing in data sharing and international cooperation. Being cooperative during compliance checks can reduce penalties, and voluntary disclosure facilities allow you to correct errors before they become investigations.

How Apex Accountants Protects You From Tax Avoidance In Construction Management Sector 

Apex Accountants specialises in guiding construction businesses through complex tax landscapes. We stay on top of legislative changes and industry trends, so you don’t have to.

• Tailored tax advice: We help you understand and comply with CIS obligations, IR35 off‑payroll rules and VAT reverse‑charge requirements. Our experts structure projects and contracts to minimise risks while maintaining compliance.
  
• Compliance health checks: Our team reviews your processes and records—payroll, subcontractor verification, CIS deductions and VAT—identifying gaps and recommending improvements to strengthen your systems.
  
• Training and education: We provide in-house training for project managers, finance teams, and directors on identifying avoidance schemes, verifying subcontractors, and maintaining digital records.
  
• Digital record‑keeping solutions: We assist in implementing cloud‑based accounting platforms aligned with MTD requirements. Digital records support timely reporting and help identify discrepancies before HMRC does.
  
• Representation during HMRC enquiries: Should you receive a compliance check, our specialists liaise with HMRC on your behalf, protecting your rights and resolving issues efficiently.
  
• Ongoing updates and alerts: We keep clients informed about new HMRC guidance, policy changes, and consultation outcomes. Early awareness of developments—such as universal stop notices—allows you to adjust practices before changes become mandatory.

Conclusion

HMRC’s July 2025 announcements represent a major escalation in the fight against tax avoidance. With tougher legislation, larger compliance teams and AI‑driven risk analysis, businesses—especially those in construction—can expect greater scrutiny. Universal stop notices and promoter action notices will make it harder for promoters to rebrand schemes. Failing to notify HMRC about arrangements will be a criminal offence. By acting proactively, working with trusted advisers, and embracing transparency, construction management companies can stay compliant. This will help protect their long-term stability. Apex Accountants is here to guide you through this evolving landscape.