Construction Industry Project

Common Questions raised at the Open Forums March 2006

Can Country money details be published on the website?

pdfThis document sets out the conditions to be satisfied and the rates for Country Money payments pre and post 2004 for both construction and electrical contracting (PDF, 37KB).

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Is a Form RCT 1 required for each contract?

Strictly an RCT 1 is required for each contract. However, where a contract is renewed, Revenue will look for a completed form for each year that the contract is renewed.

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Where a subcontractor is paid gross without a payments card, what is the procedure? Is there any concession in such cases?

The principal contractor is liable for the tax that should have been deducted and interest and penalties under Section 531(1) TCA, 1997. In relation to concessions, this question is answered in Tax Briefing 29 as copied below.

Extract from Tax Briefing 29

"Question: How are payments to subcontractors by principal contractors prior to receipt of a relevant payments card (RCT 47) to be treated for tax purposes?

Answer: Section 531(1) Taxes Consolidation Act 1997 formerly [Section 17(2) Finance Act 1970] obliges a principal contractor to deduct tax from payments to subcontractors. Section 531(12)(b) Taxes Consolidation Act 1997 formerly [Subsection (8)(b) Finance Act 1970] allows the principal to pay the subcontractor without deduction of tax where the principal has received a relevant payments card from the Revenue Commissioners viz. "a principal who, upon receiving the card, shall .... be entitled during the income tax year (or the unexpired portion thereof) to which the relevant payments relates to make payments to the subcontractor named in the card without deduction of tax."

Accordingly, payments cannot be made without deduction of tax by principal contractors to subcontractors prior to receipt of the relevant payments card (RCT 47) from the tax office. Failure by principal contractors to adhere to this leaves them liable to payment of the tax which should have been deducted in accordance with Section 531(1) Taxes Consolidation Act 1997 formerly [Section 17(2) Finance Act 1970].

However, where exceptionally a payment is made prior to receipt of a relevant payments card and the tax affairs of both the principal and subcontractor are fully up to date, Revenue will not seek to collect the tax involved. These types of cases should be exceptional. Revenue reserves the right to pursue collection of the tax involved where principal contractors are abusing the system or are habitually resorting to making payments prior to receipt of RCT 47's."

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In relation to the legislative changes 2006, how will future compliance be determined?

To qualify for a certificate of authorisation (C2), a subcontractor must be tax compliant historically and Revenue must also have good reason to expect that the subcontractor will be tax compliant in the future.

The practical implementation of the legislation will be covered in Tax Briefing in June 2006 and on this page on the website in due course.

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Have Revenue any proposals to look at "once off" housing projects? What are the tax liabilities where a site is purchased, house constructed and sold as a "once-off"? Does RCT apply?

Yes, once off housing projects are being looked at as part of the national construction project. In relation to the application of RCT provisions, the badges of trade should be examined to ascertain if a trade exists.

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Are non-residents going to be treated any differently to residents? As non-residents will be dealt with centrally, does this identify them as a higher risk?

At present non-resident contractors have their tax affairs dealt with in the Revenue Districts based on where the site they are working from is located. As non-resident contractors move from site to site this has led to customer service, administrative and management issues. Having the registration of non-residents managed in a central location will ease these problems. The new Unit is being set up in Dublin City Centre District from May 2006. They will be dealt with in the same manner as other contractors, apart from any residence issues that might arise. Site visits, for example, will be carried out by the local Revenue District.

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Are there any proposals to allow for the efiling of RCT forms and applications on the Revenue On-Line Service (ROS)?

ROS already provides for the filing and payment of the monthly RCT 30 Forms and the filing of the annual RCT 35 Form. During 2006, Revenue will be looking at the potential to provide further e-services for the construction sector and specifically for the smooth operation of the RCT procedures. This will include a review of RCT procedures to see what changes and/or improvements can be made to them for both paper and electronic filers in the future. Once this review is completed the development schedule will be considered.

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Will "self review" letters be issuing in advance of the project commencing (as happened with other sectors)?

No, generally speaking, "self review" letters will not be issuing.

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In relation to the legislative changes in Finance Act, 2006, how will the income threshold on payments cards be applied? What is the normal limit that will be applied?

This procedure has operated on an administrative basis in recent years. It is now being put on a statutory basis. When applying for a C2 the details of the application will be examined. If it is considered appropriate a limit will be put on the amount that can be paid gross, taking into account the size of the contract being entered into and the need to allow for expansion of the business. Any payments made in excess of the limit should be subjected to RCT. Where a limit is applied in a case, the subcontractor concerned may apply to Revenue for an increased limit or the removal of the limit. If a subcontractor is not satisfied with any limit in relation to him or her, he or she will have a right of appeal to the Appeal Commissioners and the courts.

The implementation of the legislation will be covered in Tax Briefing in June 2006 and on this page on the web site in due course.

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You state that all new C2 holders will be monitored within 6 months. What will this monitoring entail?

Initially each new case will be reviewed from the tax office records. If further action is required a visit may be necessary which will usually take the form of a 1 to 2 hour assurance check. The books and records being kept will be looked at to ensure that they meet Revenue requirements. The operation of RCT/VAT/PAYE will be looked at including the RCT 1 and RCTDC procedure if appropriate. The treatment of expenses and country money will also be examined. Any non-compliance issue will be followed up. The assurance check of itself is not an audit. The list of checks is not exhaustive and will vary depending on the information already available to Revenue. In some cases, a visit may not be necessary.

How many Revenue Officers will be involved in a site visit? What documentation /identification will they have?

Site visits are unannounced. The Revenue team of officers will present themselves to the person in charge, produce their identification and outline the purpose of the visit. Some may be in uniform. The number of officers on site visits will vary having regard to the size of the operation, the need to keep disruption to a minimum and the number of other government agencies who may be involved.

All Revenue officers visiting sites will meet the Safe Pass requirements. Officers will carry their Revenue identification and authorisations, together with their Safe Pass cards.

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What normally happens on a site visit?

Firstly, the team will show their authorisations etc. as described in Question 11 above. The visit will include a check to ensure that all the RCT obligations are being followed including the correct classification of all workers on the site as either self employed sub contractors or employees. Sight of the books and records may be requested. Other tax obligations e.g. VAT registration, employers PAYE/PRSI, fuel testing etc. may also be reviewed.

As no formal audit letter will have issued, the normal unprompted disclosure provisions in the Code of Practice will apply.

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What are the delays in issuing C2s?

Every effort is made to turn C2 applications around as quickly as possible.

It usually takes a minimum of 3 to 4 weeks to actually process an application, which includes having the card printed outside of the State. In order to avoid unnecessary delays, it is important that the application is made as soon as possible and that the full information and documentation is provided at the outset and that the applicants tax affairs are in order. Issues that have caused delays in the past include: the non signing of the photocard ID card; non submission of the contract/agreements with the principal contractor or other relevant documentation; and non resident applicants requiring certificates of compliance from their country of residence etc.

Revenue is currently reviewing these procedures with a view to improving the customer service turn around time.

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What are the delays in processing Forms RCT 47?

The RCT 47 payments cards are processed as urgent items in all Tax Districts. Most cards issue without undue delay but there have been occasions when it has taken 15 - 20 working days to issue. These are being investigated and every effort will be made to improve this turn around time.

However, when reviewing an RCT46, it is sometimes necessary for an officer to carry out further checks and make contact with subcontractors before the payments card can issue. These enquiries occur on an individual case basis. There are also, of course, circumstances when an RCT47 cannot be issued due to non-compliance. In these instances Revenue will contact the sub contractor as appropriate

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What will the enhanced information technology (IT) capabilities mean to an average contractor?

Revenue will now be in a position to capture and cross check all the detailed information on the annual Form RCT35, analyse it and reconcile it with the individual records (including RCT47s issued and RCTDCs claimed).

The Collector General's Office will use the enhanced technology to pursue outstanding RCT tax and returns more efficiently.

Customers are able to file their monthly RCT30 and annual RCT35 returns, together with the relevant payments on the Revenue On-Line Service (ROS). They are also able to view their Revenue records on ROS at any time that suits them.

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What taxes will be reviewed during Revenue audits in the construction sector?

The taxes we will be concentrating on are any taxes or duties associated with the sector, fiduciary taxes and direct taxes. In terms of audit activity you can expect RCT and VAT to be combined in many of the audits. All audits will take place under the terms of the Code of Practice and audit letters will be issued.

Fiduciary taxes include:
VAT, PAYE/PRSI and RCT.

Direct taxes include:
Income tax, Corporation tax, Capital gains tax and Stamp Duty.

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Will the project be confined to principal and sub contractors within the scope of RCT?

There will be a global focus on the construction industry. It's not just about RCT but will also include the ancillary activities associated with the industry. This will include construction, project management, architects, property developers, infrastructure projects, supply chain of goods and services, civil engineering etc.

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