How does RCT work for a subcontractor?
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. The key changes affecting subcontractors are:
- The standard RCT rate is being reduced from 35% to 20%.
- Revenue will automatically put credit for any tax deducted onto the subcontractor's tax record.
- Interim repayments will be replaced by an offset system which will be linked to the tax liabilities of subcontractors (i.e. no repayments of RCT will be made during the year).
- The subcontractor will receive details from Revenue of contracts notified by principal contractors on the new system. The subcontractor will also be notified by Revenue when his/her rate changes.
- While principal contractors are obliged to engage with Revenue electronically in the new system, subcontractors, who are not also principal contractors, can interact with Revenue as normal. However, if subcontractors are registered for the Revenue Online Service (ROS), they will be able to see their own records through ROS and benefit from the online 24/7 self service channels.
Electronic RCT system - Frequently asked questions (FAQ’s) for subcontractors
Electronic RCT System
Information Leaflet issued to Subcontractors - August 2012 (PDF, 515KB)
Update on eRCT Rate Determination June 2012 (PDF, 16KB)
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
Contact details for your Local Revenue District (PDF, 69KB)
ROS enhancement to allow users to save multiple partially saved RCT Documents (PDF, 14KB)
RCT rates in the new system (PDF, 14KB)
Information for Subcontractors on the new RCT system
Subcontractor or employee?
When you take on work in the construction, forestry or meat processing industries, you should ensure that you have been correctly classified as an employee or a self-employed subcontractor.
Determining the correct employment status of a worker
Are you aware that...
- Any tax deducted from payments made by the Principal to you will be available for credit against your tax and PRSI but you must still make a return of your income to the Revenue Commissioners. Any credit for tax deducted may be affected by the general 4-year time limit for repayments - further details are provided in eBrief No. 31/2008.
- If you should have registered for VAT but failed to do so, you will be liable to pay any VAT due together with interest and penalties as appropriate.
- 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.