Issues affecting Uncertified Subcontractors - Non C2 Holders
This is the final article explaining the current operation of Relevant Contracts Tax in the Construction Sector this year. In previous articles on Revenue's Construction Industry project we looked at some of the common errors made by principal contractors and certified subcontractors. Parts of those articles were relevant to uncertified subcontractors also.
In this article we look at the specific issues that arise for uncertified subcontractors i.e. those who do not have a valid C2 and/or Form RCT 47 - payment authorisation card (including principals who are subcontractors for some contracts).
RCT 1 Procedure
When any subcontractor, certified or uncertified, enters into a relevant contract with a principal contractor, they must first satisfy themselves that a relevant contract exists. If the contract is a contract of employment, the subcontractor is an employee and the earnings are subject to PAYE/PRSI deductions.
The principal contractor and the subcontractor should examine the criteria for determining if a contractor is self-employed or an employee. If they are satisfied that the contract is not a contract of employment, they should jointly complete a 
Form RCT 1 - Principal Contractor / Subcontractor Declaration Form (PDF, 74KB). The criteria to be considered are printed on the back of the form.
The RCT 1 is retained by the principal and must be made available for inspection by Revenue when required e.g. during site visits and audits, to ensure that workers engaged in the sector have been properly classified.
The worker, whether considered to be an employee or a subcontractor, should ensure that they give the Principal Contractor their correct PPS Number, or, if this is not available, their full name, address and date of birth. The Principal Contractor should ensure that these details are correctly recorded and entered where appropriate on all relevant Revenue forms.
Legislation provides for penalties on the Principal and Subcontractor where the RCT 1 is not completed.
Payments made under deduction of tax
[This section also applies in the case of C2 holders where a valid payments card (RCT 47) has not issued to the principal contractor.]
Make sure you get a certificate of deduction:
When a principal makes a payment to a subcontractor and they do not have a relevant payments card for that subcontractor, the principal must deduct tax at 35% from the payment and must give the subcontractor a certificate of deduction (Form RCTDC) at the time of payment. Subcontractors should ensure that they are given a correctly completed Form RCTDC with their payment.
The legislation provides for a fine, on conviction, of €1,265 where the principal fails to give the subcontractor a Form RCTDC at the date of payment.
Include the gross amount in your VAT and Income Tax/Corporation Tax returns:
In calculating their profits or gains for a year, the subcontractor must include the gross payment (net received plus tax deducted) in their computations.
Revenue auditors have access to the amounts paid by principals and the RCTDC claims made and will cross check to ensure that the correct amounts are being returned as earnings.
Register for all appropriate taxes:
Uncertified subcontractors must ensure timely registration for the appropriate taxes. Despite the fact that RCT at 35% is deducted from payments made to them, it is only a payment on account. They still need to comply with their obligations in relation to timely registration, return filing and payment of taxes.
Claiming an offset or repayment:
Where a subcontractor has had tax deducted from their payments, they may apply to their local Revenue office to have this tax offset against other tax liabilities and any balance repaid. Subcontractors should be aware, that despite the fact that they may hold RCTDCs and be in credit with Revenue on the basis of the tax shown on those RCTDCs, they are obliged to keep their payment of other taxes up to date, either by direct payment of these taxes or by offset of the RCTDC tax. Generally, claims are dealt with on a monthly basis.
Returns for the various taxes (RCT 30, VAT 3, Form 11 or CT1) should be sent directly to the Collector General's Office, Limerick. Revenue's integrated computer system is designed to automatically offset credit against outstanding taxes in accordance with the Offset Regulations. RCT offsets are set against other taxes in the following order:
- RCT tax due. (Some Principal Contractors may also be uncertified subcontractors.)
- Value Added Tax
- Employer's PAYE/PRSI
- Income Tax or Corporation Tax, as appropriate.
- Capital Gains Tax
While customers can suggest their own order of offsets, the automated system clears older debt first within each category of tax first, thus avoiding interest charges in most cases.
Agents and taxpayers registered for Revenue's On-Line Service (ROS) can check their up to date position on-line. Register now at www.ros.ie
Four year time limit on claims:
Where an uncertified subcontractor claims a repayment of excess RCT deducted, it is subject to the general time limit provided for repayments i.e. within 4 years after the end of the year in which the RCTDC is issued.
Non resident uncertified subcontractors:
Claims for repayment or offset by non-resident subcontractors should be submitted to:
International Claims Section,
Office of the Revenue Commissioners,
Government Buildings,
Nenagh,
Co. Tipperary.
Telephone: (067) 33533 Fax: (067) 32916
Individual applicants must complete a claim Form IC 1 -Tax Repayment/Exemption Claim Form (PDF, 38KB). Company applicants must complete a claim Form IC 3 - Tax Repayment/Exemption Claim Form (PDF, 30KB). Both forms are also available from International Claims Section. The completed claim form should be certified by the tax office/revenue authorities in the country in which you were resident for tax purposes during the tax year in which the income was earned. The claim form can include details of any number of contracts. A questionnaire must be also be completed in respect of each contract undertaken by the non-resident uncertified subcontractor. 
Download questionnaire (MS Word, 38KB) .
Subcontractor's Checklist
- Have you registered for all appropriate taxes e.g. Income Tax, Corporation Tax, Value Added Tax or Employer's PAYE/PRSI?
- Before entering into a contract with a principal, have you consulted the guidelines on the back of the RCT 1 and correctly determined your status as an employee or self-employed contractor?
- If you are not an employee, have you completed the Form RCT 1 - Principal Contractor / Subcontractor Declaration Form (PDF, 74KB). Form RCT 1 jointly with the principal contractor?
- If you are an "uncertified subcontractor" have you received a Form RCTDC for each payment received?
- If you are an "uncertified subcontractor", are you including the gross payment in your computations for Income Tax/Corporation Tax?
- If you are an "uncertified subcontractor" have you submitted your Forms RCTDC to Revenue within the time limit?
- If you are an "uncertified non-resident subcontractor" have you completed and submitted Form IC 1/IC 3 and the relevant questionnaire?
- If you are applying for a C2 have you completed Form RCT 5 and supplied all relevant documentation in good time? In particular, are your tax affairs up to date?
- If you are applying for a C2 have you provided a photograph and signature in the required format?
- If you are applying for a C2 and propose to use the nominated bank account procedure, have you provided Revenue with documentary evidence of the nominated bank account?
- As a C2 holder, have you completed the Form RCT 1 - Principal Contractor / Subcontractor Declaration Form (PDF, 74KB) . Form RCT 1 procedure before the contract commences?
- As a C2 holder who is not an employee, have you completed the Form RCT 46 in good time before the first payment is due?
- As a C2 holder, have you kept your tax affairs up to date?
- As an employer are you operating PAYE/PRSI on all payments made to your employees, excluding the approved agreements on "Country Money"?
- As an employer are you operating the approved "Country Money" scheme correctly?