Regulation 24ZA is a new statutory exemption, in force from 6 April 2026, that removes payments made to local authorities and public sector bodies from the scope of the Construction Industry Scheme entirely: no CIS deduction is applied to those payments and they are not included in the contractor's CIS300 monthly return.

Before April 2026, contractors working on public sector projects had to apply CIS deductions and report those payments on their monthly return in the same way as any other subcontractor payment. Regulation 24ZA ended that obligation for qualifying public-body payees. The rationale is that public sector bodies settle their own tax obligations through different mechanisms and have no practical need for the CIS withholding regime.

The exemption is relevant primarily to the contractor audience: a building firm engaged on a contract for a local council, NHS trust, or other central government body no longer deducts 20% or 30% from payments to that public body and no longer reports those payments on the CIS300. For subcontractors working for a contractor who is in turn engaged by a public body, the normal CIS rules continue to apply to the contractor-to-subcontractor payment leg.

Contractors should review any payment records from before April 2026 that covered public sector counterparties to confirm that returns filed after that date correctly exclude those payments. Including exempt public-body payments in the CIS300 is not itself a penalty risk, but it creates unnecessary complexity and may affect the apparent CIS liability figure used to calculate late-filing penalty multipliers.

  • In force: 6 April 2026.
  • Scope: local authorities and qualifying public sector bodies.
  • Effect: no CIS deduction on payments to those bodies; those payments excluded from CIS300.
  • Who it affects: contractors (persona C); subcontractor-to-contractor rules unchanged.

The April 2026 changes to CIS, including this exemption, are covered in full at CIS April 2026 rule changes explained. CIS300 filing obligations are set out at CIS monthly returns: deadlines, nil returns and penalties.