Relevant Contracts Tax (RCT) applies to any payment made by a principal contractor to a subcontractor under a relevant contract. A relevant contract in this instance is a contract to carry out, or supply labour for the performance of relevant operations in the construction, forestry or meat processing industry.
From the 1st of January of this year, the current Relevant Contacts Tax (RCT) paper filing system is to be replaced by an electronic system. Under this new system principal contractors will be obliged to communicate with Revenue through their online system Revenue Online Services (ROS).
This relates to all relevant contracts including those which are ongoing at 31st December 2011. The principle is required to notify Revenue via ROS of all payments on relevant contracts from 1st January ‘12. It will however not be possible to notify a payment on ROS unless the contract has been registered, therefore if you’re not already registered it’s something you need to look into or alternatively give us a shout at Bradán Consulting and let us look after it for you.
The new system will have three rates: 0%, 20% and 35%. Subcontractors who currently satisfy the requirements for a C2 card will qualify for the 0% rate. However, in certain limited circumstances a subcontractor may be placed on the 35%, for example subcontractors who are not registered with Revenue or where there are important compliance issues to be addressed. All other subcontractors will likely be eligible for the standard 20% rate.
When a principal enters into a relevant contract with a subcontractor, they must provide Revenue with details of the subcontractor and the contract on-line, including confirmation that the contract is not a contract of employment.
Benefits of the new system:
Reduced administrative burden, e.g. Principals will no longer have to:
- Complete Forms RCTDC/RCT, 46/RCT and 46A.
- Manually record payments on forms RCT 48/RCT 47
- Complete the annual RCT 35 return.
The Revenue will provide clarity on the RCT rate for each subcontractor. When the principal notifies Revenue of a relevant payment to a subcontractor online, Revenue will then confirm by return that subcontractor’s RCT rate and the amount of RCT to be deducted from the payment, via an on-line “deduction authorisation”
- The standard rate of RCT has been reduced from 35% to 20%.
- Only one rate will apply to a subcontractor at any one point in time. Principals will be required to apply this rate to payments made to the subcontractor.
- There will now no longer be a requirement for the principal and subcontractor to jointly complete Form RCT46 in order to receive gross payments.
- Subcontractors will no longer have to submit RCTDC claims to Revenue. When a principal notifies Revenue of a relevant payment, Revenue will automatically credit RCT deducted to the subcontractors’ tax record. This RCT credit will be available for offset against other tax liabilities as they arise or for repayment annually.
Finally, principal contractors and their agents should be aware that similar to the P35, that the filing deadline for the RCT35 return for the year 1st January ’11 to the 31st December ’11 is the 15th February ’12, however, there is also an extension to the 23rd of February on RCT35 returns for those who are making their returns online.
Revenue have previously stressed the importance to contractors of filing the RCT35 return on time, so don’t risk facing penalties, be on time!!
For additional information on RCT or any other accounting or tax issues you may have, don’t hesitate to contact Bradán Consulting today, we’ll be glad to help.