Relevant Contracts Tax Electronic System – Are you compliant?

Relevant Contracts Tax (RCT) applies to payments made by a principal contract to a subcontractor under a relevant contract.

This is a contract to carry out or supply labour for the performance of relevant operations in the following industries:

• Construction
• Forestry
• Meat Processing

RCT applies to both resident and non-resident contractors operating in these industries.

RCT is a tax deduction system whereby a principal contractor registers with Revenue any relevant contract. This is done using the Revenue Online System (ROS).

Tax is deducted by a principal contractor according to the rate advised by Revenue. Where tax is deducted, the subcontractor will be notified by Revenue through ROS.

Electronic Relevant Contracts Tax system

In January 2012, RCT became eRCT. This new online system is now mandatory and paper returns are no longer accepted.

With eRCT in full operation for more than 2 years, Revenue expects all principals and subcontractors to be using the system fully and correctly at this stage. Any leeway is now gone and Revenue will enforce penalties and interest where contracts and payments are not correctly operated.

Here are some important reminders about the eRCT system to ensure you are fully compliant:

• Principal contractors must register all contracts within the above specified industries online using ROS.
• Principal contractors must pre-approve all payments to contractors online, deduct any taxes as instructed and pay in a timely fashion to Revenue.
• Revenue is conducting audits and if they find any breaches of the rules they will enforce penalties and interest.
• Subcontractors must keep their tax affairs up-to-date to retain the 0% deduction rate on payments. If you fall behind, 20% will be deducted from payments. If further non-compliance continues, 35% will be deducted.
• Revenue is carrying our eRCT bulk rate reviews where subcontractors’ rates can be changed. It is therefore important to keep all taxes up-to-date to ensure that your deduction rate is not increased.
• If a contractors RCT deduction rate is set at 35% they will not qualify as an allowable contractor under the new Home Renovation Incentive Scheme.

Now that we are starting to see an upturn in the construction, forestry and fishing industries, the last thing you need is compliance issues with the Revenue standing in the way of you driving your business forward.

It is therefore essential that your business is RCT compliant and that the appropriate system controls are in place so that RCT is operating efficiently. Visit Revenue’s website for more information about Relevant Contracts Tax and the Electronic RCT System.

If you need any help understanding eRCT and how it applies to your business, contact Eoghan Farrelly at DBASS on 01 849 8800.

Written by Eoghan Farrelly, DBASS Manager

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