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Application of the Tax
Applies mainly to the construction industry
All payments made in course of relevant contract
What is a relevant contract?
There is wide definition of what constitutes construction operations
What is a Principal Contractor?
A person engaged in Building or/and Development
A person Connected with the above, e.g. Company director
How does RCT operate?
35% Tax deduction on Gross Payments
Option to avoid, using C2 procedure
Form RCT1-required on commencement of a contract
C2 Subcontractors
Subcontractor obtains C2 card
Principal requests sight of C2-this is like an identity card
Principal applies to Revenue for a payments card (C47)
Use Form RCT46/46A to apply for payments card
Make payments Gross on receipt of C47
Distinction C2 V C47
Apply in good time for next years cards
Pitfalls on C2 Operations
Gross payments made without card (often at beginning of year)
Gross payments prior to authorised date on the card
Gross payments made in excess of limit on the card
Omission of 'real' subcontractors from the system
RCT35 year end return sheds light to Revenue
Gross Payments v Gross Invoices recorded on cards
Revenue Approach
Easy target for tax collection
Rigorous enforcement
Large tax take therefore large penalties and interest
Concessions in exceptional circumstances
Interaction with VAT
Applies to invoices issuing from 1st September 2008
Reverse Charge Basis
Format of invoice from subcontractor is specific
Subcontractor will not charge VAT- Monitor after 1/9/08
RCT only operated on net of VAT amount
Principal accounts for VAT as both sale and purchase
Zero net effect – Don't be fooled as revenue will penalise mistakes
Finally...
RCT is a complex area of taxation and relatively small errors can result in large revenue penalties and interest. It is best to think and plan your business exposure in this regard. We are here to help – Always call if unsure
Michael Byrne, June 2008.
