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eBrief No. 10/2007 – RCT

This eBrief clarifies the treatment in Tax Briefing No. 29; and changes the Code of Practice for Revenue Auditors in relation to Relevant Contracts Tax (RCT), where, in exceptional circumstances, payments are made gross without a relevant payments card.

Tax Briefing 29 indicated that Revenue would not seek to collect RCT in exceptional circumstances where a payment is made gross prior to receipt of a relevant payments card, and the tax affairs of both the principal and the subcontractor are fully up to date at the time payment is made.

Revenue have now clarified that this treatment will only be allowed in future in the very narrow and exceptional circumstances – where Revenue has received an application for a payments card before a payment is made and, through no fault of the principal, there is a delay on the Revenue's part in issuing the payments card.

The eBrief states that the existence of a valid C2 alone is not sufficient to allow the principal make gross payments to the subcontractor. The principal will be held liable for the RCT that should have been deducted, together with interest and penalties.

According to the eBrief, Revenue are prepared to amend the normal audit settlement regime (set out in the Code of Practice for Revenue Auditors) only in the following exceptional circumstances:

  • Genuinely technical mistaken belief that the contract is not a “relevant contract”;
  • “No loss of revenue”, similar to the “no loss of VAT” in paragraph 11.1.1 of the Code, involving non-operation of RCT with a valid C2 holder;
  • “No loss of revenue” in group cases, similar to paragraph 11.1.2 of the Code in relation to VAT Group Cases, involving non-operation of RCT on intra-group transactions with valid C2 holders;
  • Exceptional failure to deduct RCT which is rectified within one month after the RCT35 filing deadline.

Representations had already been made to Revenue on this issue by ICAI at TALC Audit, as the proposed practice is restrictive compared to the settlements mechanisms generally available under the Audit Code of Practice. A meeting with Revenue to discuss this matter further took place on 20 February.

A copy of eBrief No. 10/2007 has been reproduced at Section 2.06.