Readers are reminded that the new electronic RCT system, known as RCT Service, is due to come into effect from 1 January 2012. Under this new system, all principal contractors in the construction, forestry and meat processing industries must engage electronically with Revenue as they pay their subcontractors. Chartered Accountants Ireland will hold a seminar on 23 November on the RCT Service with speakers from Revenue and Tax Practice giving a detailed account and demonstration of how the new RCT Service will operate.

Readers should note that it is not necessary to obtain third party software to work the new system as principals can engage with Revenue using one or a combination of; ROS online, ROS offline application, our their own in-house software, which must be compatible with the RCT Service. Responding to concerns raised by principals about updating their in-house accounting systems in time for 1 January 2012, Revenue will provide a number of transitional arrangements:

Application of Rates

Three rates will apply in the new system (0%, 20% and 35%), however, for the first three months in 2012:

• Subcontractors holding a valid C2 card will automatically qualify for the 0% rate provided they keep their tax affairs up to date. All other subcontractors will be placed on the 20% rate.
• Only in exceptional circumstances will a subcontractor's rate change during this three month period e.g. “unknown” subcontractors.
• When the “unknown” subcontractor registers with Revenue, the 35% rate will change to either 0% or 20% for the remainder of this three month period.

Readers should note that from 1 April 2012 subcontractors’ rates will no longer be frozen and may change at any time.

For cases where the in-house accounting system is not fully integrated with the new RCT system by 1 January 2012, principals may continue to process payments to subcontractors and deduct RCT using their current system subject to giving advance notification to Revenue of these payments using the ROS online or ROS offline applications.

Multiple Contracts

Under the new RCT system where principals engage the same subcontractor on various contracts they will be required to notify each contract separately in the new system unless the contracts can be considered to be part of one on-going Relevant contract with the subcontractor.

To assist principals with their transition to the new system, Revenue will only require that one contract be notified for each subcontractor engaged by the principal for the duration of 2012, regardless of the number of contracts being entered into with that subcontractor.

It is important to note that this transitional arrangement will end on 31 December 2012 and from 1 January 2013; multiple contracts with the same subcontractor should be notified separately on the new system unless the contract is part of one on-going relevant contract.

Further details of the new RCT system and the transitional arrangements are available on the Revenue website http://www.revenue.ie/en/tax/rct/rct-changes-2011.html.

An understanding of the new RCT Service and how it works is essential for advisors involved in advising businesses in the construction, meat processing or forestry industries. Chartered Accountants Ireland will hold a seminar on 23 November on the RCT Service with speakers from Revenue and Tax Practice giving a detailed account and demonstration of how the new RCT Service will operate. For further details on this seminar and to book go to www.charteredaccountants.ie/CPD/Courses/