Construction Industry

Electronic RCT System

Revised procedures for Tax Clearance in respect of Public Service Contracts, Grants, Subsidies and similar type payments (Department of Finance Circulars 43/2006 and 44/2006) (PDF, 27KB)

CIF/Revenue briefing sessions - 2010

Between April and June this year, Revenue delivered presentations on RCT and other topics to CIF members around the country (Tullamore, Sligo, Cork, Dublin, Galway, New Ross and Limerick). Feedback from CIF members was very positive. As a result of the questions raised at these sessions, Revenue has produced some frequently asked questions (FAQs). Copies of the presentations and the FAQs are available below:

Construction Industry Project

Given the growth in the construction industry in the early part of the decade, concerns were expressed that Revenue could be more proactive in monitoring the sector. These concerns were particularly enunciated in the deliberations of the Public Accounts Committee on a report carried out by the Comptroller and Auditor General on Revenue's approach to the sector.

In addressing those concerns the Chairman of Revenue, Frank Daly, gave a commitment to increase the Revenue resources devoted to managing compliance in the sector. The commitment given was that 25% of the audit and compliance resources in 2006 would be devoted to the sector. The decision was then made to manage the project on a national basis to make best use of these resources.

The project carried over into 2007 and 2008. Details on the project are available here.

As part of the project, this online Construction page was set up to provide a central point for all Revenue material of relevance to the sector.

Tax obligations

It is important that you are aware of your tax obligations. Contractors are obliged to register for all the appropriate taxes such as Income Tax, (if an individual), Corporation Tax (if a company), Value Added Tax (VAT) or Employer's PAYE/PRSI. Find out more about your tax obligations.

Extension of Time Limit for errors discovered in completing your Form RCT 35 2009 Payments made gross to subcontractors without a payments card (RCT 47)

Revenue is extending the Time Limit for making a disclosure in relation to the 2009 RCT 35 return by a further month to 15 April (and 23 April for ROS customers). You may wish to review your return and if necessary send a qualifying disclosure of any errors made, along with the accompanying payment, to your local Revenue Office. Further details are available in eBrief No.12/2010

Determining employment status of workers

When a principal contractor takes on a worker in the construction sector they must first establish whether the worker is an employee or self-employed as a subcontractor. Guidelines on determining the correct employment status of a worker are provided in the Code of Practice for Determining Employment or Self-Employment Status of Individuals (PDF, 241KB).

Relevant Contracts Tax (RCT)

RCT only applies to payments made by a principal contractor to a subcontractor under a relevant contract (this is a contract to carry out, or supply labour for the performance of relevant operations in the construction, forestry or meat processing industry). A list of construction operations that are subject to RCT is available here.

Employers

Where contractors (principals or subcontractors) have employees, they must register for and operate PAYE/PRSI for those employees. Further information on operating PAYE/PRSI.

Country money

Due to the nature of the work in the construction industry (employees are required to travel to different building sites according to the duration of the employer's contract at each site), an agreement was reached in 1976 between the Construction Industry Federation and the Construction and Electrical Workers Unions in relation to the payment of country money. The payment was designed to compensate employees for expenses incurred travelling varying distances to and from building sites and to cover subsistence expenses.

For further information read:
Criteria for payment of country money (PDF, 62KB) - Updated September 2009

Operation of VAT in the Construction Industry

Contractors operating in the building sector are carrying on taxable activities and are obliged to register for VAT if their annual turnover exceeds (or is likely to exceed) the figure specified in the VAT Acts (€37,500 from May 2008). Guidelines and further information on the operation of VAT are available here

Revenue leaflet IT 49 provides information on VAT for small businesses (PDF, 403KB)

Following the introduction of the VAT Reverse Charge on 1 September 2008, resident subcontractors providing construction services (that are subject to RCT) to principal contractors will still be required to register for VAT, subject to the normal VAT rules. However, these subcontractors will no longer be obliged to charge and account for VAT on construction services (except haulage for hire) supplied to principal contractors.

From 1 September 2008, non-resident subcontractors who provide construction services to principal contractors that are within the scope of RCT (as defined in Section 530 of the Taxes Consolidation Act, 1997 but excluding haulage for hire), are not required to register for VAT. Such subcontractors may however register for VAT, in order to claim credit for input VAT incurred. Further information for subcontractors (PDF, 33KB.

Where the VAT Reverse Charge applies, principal contractors must account for the VAT as if they had supplied the service.

The VAT Reverse Charge does not impact on the VAT obligations of resident and non-resident subcontractors performing relevant operations in the meat processing or forestry industries or those involved in haulage for hire within the construction industry – these subcontractors will continue to be obliged to register for, charge and account for VAT, subject to the normal VAT rules.

Further information on the VAT Reverse Charge. Subcontractors are advised to consult the Revenue VAT Guide (PDF, 1.2MB) or visit the VAT Section of the Revenue website to ascertain their VAT obligations.

A new system of VAT on property was introduced in 2008. The objective of the new system was to rationalise and simplify the VAT treatment of property transactions.

ROS Services for contractors

As well as allowing you to file tax returns and forms and make payments for taxes online in a variety of methods, ROS also enables you to view your own, or your client's, current position with Revenue for various taxes and levies for which you are registered, including Relevant Contracts Tax. You can also use this facility to view details of your payments made, returns filed or due, registration information or charges and liabilities or to request Statements of Account, for older periods not yet covered by ROS. Further details are available here.

Articles and other material of interest (pre 2008):

Tax Briefing articles

Special feature in Tax Briefing on the Construction Industry, RCT - 2006

Tax Briefing articles which refer to RCT in the Construction Sector (1996 – 2004)