Significant changes to Relevent Contracts Tax (RCT)
From 1st January 2012, all relevant contracts, including those that are ongoing at the end of December 2011, must be registered on-line. Principals must notify all payments on relevant contracts to Revenue on-line from 1st January 2012. It will not be possible to notify a payment on-line unless the contract has been registered.
Principal contractors will be able to register contracts on-line from 28th November 2011.
All principals in the meat processing, construction and forestry sectors will be obliged to submit information, data, payments and returns to Revenue electronically.
All contacts between the principal (or agent on behalf of the principal) and Revenue will be through an on-line process.
The new system will have three rates: 0%, 20% and 35%. Subcontractors who satisfy the current criteria for a C2 card will qualify for the 0% rate. In certain limited cases a subcontractor will be placed at 35% e.g. subcontractors who are not registered with Revenue or where there are serious compliance issues to be addressed. All other subcontractors will be eligible for the standard 20% rate.
Overview of the system
- When a principal enters into a relevant contract with a subcontractor, s/he will be obliged to provide Revenue with details of the subcontractor and contract on-line, including confirmation that the contract being entered into is not a contract of employment.
- Immediately before making a payment under the contract, the principal must notify Revenue (by electronic means) of his or her intention to make the payment and state the gross amount to be paid.
- Revenue will issue a deduction authorisation to the principal. This authorisation will set out the rate of tax and the amount of tax to be deducted from the payment. The principal must provide a copy of the authorisation to the subcontractor.
- Revenue will automatically credit RCT deducted to the subcontractor’s tax record. The RCT credit will be available for offset as it arises or for repayment annually.
- Revenue will now have all the details of the payments notified to them by principals. Depending on the filing frequency of the principal, a deduction summary will be issued to the principal, either monthly or quarterly, listing all of the payments Revenue has been made aware of. If the summary is correct, the principal needs only to arrange payment on or before the due date for the return. The return will be deemed to have been made on that date. If the summary requires amendment the principal can amend it on-line and arrange for payment on or before the due date.
- Payment should be made on-line by the due date (the 23rd day after the end of the period covered by the return).
Revenue state that the administration burden of operating RCT will be reduced, for example, principals will no longer need to:
- Order stocks of RCT forms,
- Complete Forms RCTDC/RCT 46/RCT 46A,
- Manually record payments on Forms RCT 48/RCT 47,
- Complete the annual RCT 35 return,
- Complete the paper copy of Form RCT 1 with the subcontractor – a streamlined contract registration
- procedure is incorporated into the new system.
These are fundamental changes and although their implementation is subject to ministerial order you should ensure that you are ready for the changes.
For further information or to discuss further please contact Maura Duffy or Mark Butler.