Electronic RCT System
On 13 December 2011, the Minister for Finance signed the Commencement Order for the new electronic RCT system which was introduced on 1 January 2012. All principal contractors in the construction, forestry and meat processing sectors are obliged to engage electronically with Revenue and should:
- Notify Revenue of all contracts online (Contract Notification)
- Notify payments online (Payment Notification)
- Provide a copy or details of the Deduction Authorisation to the Subcontractor
- Submit monthly/quarterly returns online (Deduction Summary / Return)
- Make payments of RCT deducted
Important: Companies with in-house RCT software systems
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, 30KB) - Updated 26th July 2012
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.
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.
Where contractors (principals or subcontractors) have employees, they must register for and operate PAYE/PRSI for those employees. Further information on operating PAYE/PRSI.
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
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.