RCT

Relevant Contracts Tax

How does it apply to you?
Dominic OShaughnessy, a chartered tax advisor with William
Fry, outlines the important points of Relevant Contracts Tax.
RCT applies to those engaged in the construction, meat
processing and forestry sectors. RCT is a withholding tax
which applies to payments made by a principal contractor to a
subcontractor at rates of 0%, 20% or 35%. The applicable rate of
RCT depends upon the compliance record of the subcontractor.
For every misapplication or non-application of RCT, a penalty
applies to the principal contractor. Penalties range in severity
from 3% to 35% of the payment amount.
To whom in the construction sector should RCT apply?
Specifically RCT applies to those engaged as property
developers, main contractors and subcontractors. Property
developers generally act as the principal contractor for the
purposes of RCT and must withhold tax from relevant payments
made to a subcontractor. Subcontractors may in turn act as both
principal and subcontractor if they further engage subcontractors
to carry out construction operations on their behalf.

How is the ongoing administration

of RCT implemented?

The following may be carried out online via

ROS:
registration;
notification of contracts and payments;
receipt of deduction authorisations stating the rate of RCT to be
withheld;
filing of RCT returns; and
remitting RCT withheld from subcontractor over to Revenue.
Returns are generally filed on a monthly basis and the tax withheld on
payments to a subcontractor must be remitted to Revenue by the 23rd day
(when filing via ROS) of the month following that in which the deduction
authorisation was received.
Where 0% tax has been withheld, then a nil return should file
automatically on ROS.

Are there any concessions from RCT applying to Does a de minimis amount apply?
No de minimis applies, except in limited circumstances. RCT applies
a property developer?
A number of specific reliefs or concessions apply such that a
property developer is not considered a principal contractor for
the purposes of RCT, namely:
If developing a building for their own use or the occupation of
their employees; or
If developing a building with the sole intention of letting it on
a short-term basis (Revenue defines this as being less than 35
years).
This concession does not apply where the property developer/
investor would be a principal for RCT purposes for other reasons.
It does not apply therefore where the property developer is
connected with a construction company or a company engaged in
land development.

Would RCT apply to professional or design

services?

Generally, RCT does not apply to services provided by

professional consultants, such as civil/structural engineers and
architects.
Where a single invoice is issued for a contract involving an
element of fieldwork and professional/design services and the
fieldwork represents the majority of the contract value, then RCT
shall apply to both the fieldwork and professional/design services.

How to register for RCT as principal

contractor or subcontractor?

A company registering as principal contractor for RCT must

be registered for VAT. Online registration is available via the
Revenue Online Service (ROS).

to large main contracts and small works contracts alike. Contracts

for repair work and repair and maintenance work fall within the
requirements of RCT. Contracts for maintenance only however do not.
Revenue issued guidance that states the following are construction
operations to which RCT should apply:
repairs including the replacement of constituent parts such as replacing
doors throughout a property or windows throughout a property.
However the replacement of one door or window should not be subject
to RCT;
the replacement of a fire alarm system. However the replacement of
a number of fire extinguishers in a building should not be subject to
RCT; and
the hire of plant and machinery such as a JCB with an operator used
as an integral part of an overall construction operation. The hire of
machinery without an operator is not a construction operation and hire
payments made in these circumstances are not subject to RCT.
The repair or alteration must be material or the construction
operation must be performed as an integral part of an overall
construction operation. Unfortunately, there is no definition as to what
constitutes material, and as such there remains some confusion as to
whether RCT applies for certain small works. A common sense approach
should be adopted.

What should be included on a VAT invoice submitted to

a principal contractor in the construction sector?
The invoice must contain the narrative VAT on this supply to be
accounted for by the principal contractor and include the same
information that would appear on a normal VAT invoice, but exclude the
VAT rate and VAT amount. C

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