Revenue Tax Briefing

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Revenue Tax Briefing Issue 40, June 2000

RELEVANT CONTRACTS TAX New Regulations

New Relevant Contracts Regulations

The Revenue Commissioners have recently made new Regulations governing Relevant Contracts Tax (RCT). The new regulations, known as the Income Tax (Relevant Contracts Tax) Regulations 2000 (S.I. No. 71 of 2000), are effective from 6 April 2000.

RCT Procedures

RCT applies to payments to self-employed subcontractors in the Construction, Meat Processing and Forestry Industries. Principal contractors are obliged to deduct tax at 35% from all payments to subcontractors in these industries unless the principal contractor has received a Relevant Payments Card in respect of a subcontractor. Application for a Relevant Payments Card is made jointly by the principal contractor and the subcontractor to the principal contractor’s local Inspector of Taxes. To apply, the subcontractor must hold a current C2 certificate of authorisation.

A principal contractor who deducts tax during a month is obliged to make a return to the Collector- General and remit the tax deducted within 9 days after the end of the income tax month. A principal contractor who has received a monthly return form from the Collector-General is obliged to make a return, whether or not tax has been deducted in the previous month.

Matters covered by the new regulations

As well as consolidating all previous RCT regulations from 1970 onwards and updating those regulations to bring them into line with the Taxes Consolidation Act 1997, the new regulations also make a number of significant changes:

  • Regulation 9 deals with the situation where an individual is nominated to produce a person’s C2. The regulations previously allowed for a nominated user of a C2 in the case of a company or partnership. The new regulation allows a C2 holder who is an individual to nominate an employee to produce his or her C2. This will be of assistance to subcontractors who may have to travel long distance to produce their C2 in person to a principal contractor. As an alternative, such subcontractors need not produce their C2 in person where they opt to have all payments made into a nominated bank account and the principal contractor undertakes to make all payments into that account - see Tax Briefing, Issue 37 (October 1999).
  • Regulation 11 provides that the minimum turnover of a subcontractor who is entitled to a C2 which will be valid for 3 years is reduced from £20m to £5m. It is too late at this stage to change C2’s issued for 2000/01. Where we become aware that a C2 should be for a period of 3 years, we will amend the C2 and issue a replacement. Existing Relevant Payments Cards will not be affected. If any of your clients consider they are entitled to a three-year C2, they should contact their local Inspector.
  • Regulation 13 provides for a new monthly estimate of tax due by a principal contractor in respect of RCT deducted from subcontractors. The new estimate will be raised by the Collector- General and will apply where a principal contractor fails to remit tax deducted or fails to make a monthly return to the Collector- General, on form RCT 30, or both. The principal contractor may appeal to the Appeal Commissioners within 30 days of the notice of the estimate or may displace the estimate by making a return for the month and paying the tax due in accordance with that return. Where court proceedings for recovery of tax charged in an estimate have commenced or where the tax charged has been referred to the county sheriff or registrar for collection, the estimate may not be displaced unless the Revenue Commissioners otherwise direct, until the collection action has been completed.
  • Regulation 14 provides for an annual estimate to be made on principal contractors by the Inspector of Taxes or other nominated officer. The new regulation is similar to the existing regulation 12 but self assessment procedures are now applied to any such estimate. In particular, a principal must make all returns due and pay any tax due in accordance with that return for the period of the estimate before an appeal can be made. The estimate may be amended by the Inspector, in accordance with Section 955 TCA 1997. It may be made during a tax year and may also extend to two or more tax years.
  • Regulation 15 provides for computer produced estimates in accordance with Regulations 13 or 14. The regulation is similar to Section 959(2) TCA 1997 which applies in relation to self assessment.
  • Regulation 18 deals with the procedures for applying for a Relevant Payments Card. It provides that a principal contractor shall examine a subcontractor’s C2 before applying for a Relevant Payments Card and satisfy himself or herself that the person who produces the C2 is the person whose photograph appears on the C2. Both the subcontractor and the principal contractor are obliged to sign the application, in each other’s presence.

Where the subcontractor opts to have payments made into a nominated bank account (see above Regulation 9), the subcontractor must insert details of the nominated bank account on the application and sign it. The application is then forwarded to the principal contractor for signature and submission to the tax office.

Where a principal applies for Relevant Payments Cards for subcontractors for whom he or she held a C2 for the previous year -see Tax Briefing, Issue 37 (October 1999), the application must include such details as are required by the form or applications RCT 46A. Note: An application on form 46A may be made only in respect of subcontractors where a contract is ongoing at the end of the preceding tax year. It appears that some principal contractors have been applying for Relevant Payments Cards for all subcontractors who did work for them during the previous year. These applications are incorrect and may be subject to Revenue penalty - see Section 531(14)(i) TCA 1997.

  • Regulation 20 extends the time limit for making an annual return of payments to subcontractors (RCT 35) from 10 to 46 days after the end of the tax year.

Further Information

Enquiries regarding the new regulations can made at local tax offices. Copies of the Regulations are available from the Revenue website www.revenue.ie or from the Government Publications Office, Molesworth Street, Dublin 2. The Presentation No. is 8367 and the cost is £3.00.