How does RCT work for a principal contractor?
An overview of how RCT works and the forms that are involved
Who is a principal contractor
A principal contractor in the construction, forestry and meat processing industry is a person who takes on a subcontractor and who:
- Carries on a business which includes the erection of buildings or the development of land or the manufacture, treatment or extraction of materials for use, whether used or not, in construction operations;
- Carries on a business of meat processing operations in an establishment approved and inspected in accordance with the European Communities (Fresh Meat) Regulations, 1997. Carries on a business of meat processing operations in an establishment approved and inspected in accordance with the European Communities (Fresh Poultry-meat) Regulations, 1996;
- Carries on a business of forestry operations which includes the processing (including cutting and preserving) of wood from thinned or felled trees in sawmills or other like premises or the supply of thinned or felled trees for such processing;
- Is connected with a company which carries on any of the above businesses;
- Is a local authority or a public utility society or a body referred to in subparagraph (i) or (ii) of section 12(2)(a) or section 19 or 45 of the Housing Act 1966;
- Is a Minister of the Government;
- Is a board established by or under Statute or any board or body established by or under royal charter and funded wholly or mainly out of moneys provided by the Oireachtas;
- Carries on any gas, water, electricity, hydraulic power, dock, canal or railway undertaking;
- Is a subcontractor who subcontracts all or part of the contract to a subcontractor.
Determining Employment Status of workers you engage
When you engage a worker to perform relevant operations, you must first determine whether the worker is a subcontractor or an employee.
Determining the correct employment status of a worker
If a contract of employment was incorrectly classified as a relevant contract, the principal contractor will be liable to pay the PAYE and PRSI that should have been deducted together with interest and penalties as appropriate.
Principal Contractor Checklist (MS Word, 25KB)
Are you aware that...
- If a principal contractor has not received an RCT 47 for the subcontractor, they must deduct relevant contracts tax (RCT) at 35% from each payment to the subcontractor. If a principal has made gross payments to a subcontractor without having obtained the RCT 47 (or after the limit on the RCT 47 has been reached), the principal will be liable for the tax (RCT) that should have been deducted from the subcontractor. Interest and penalties may also be applied.
- As a principal contractor in the construction sector, you will be affected by the introduction of the VAT Reverse Charge on construction services that are subject to RCT.
- You must retain all relevant payments cards (Forms RCT47), relevant tax deduction cards (Forms RCT 48) and Forms RCT 1 for a period of 6 years after the end of the tax year to which they refer.
