Revenue have issued guidance, including full details and FAQs, in relation to the new rules applying to principal contractors and sub-contractors involved in construction operations to which RCT applies.

From 1 September 2008 the charge the sub-contractor makes to a principal contractor does not include VAT. Instead the principal contractor calculates the VAT on the amount charged by the sub-contractor and accounts for the VAT directly to the Revenue Commissioners through his/her VAT return.

Revenue have confirmed to the ICAI that potentially 145,000 taxpayers will be affected by the new VAT reverse charge rules for construction services due to be introduced on 1 September.

Revenue have stepped up its information campaign on the new VAT rules and will issue explanatory letters to accountants of taxpayers registered for RCT in June, followed by explanatory letters to taxpayers registered for RCT. The new system applies to principal contractors and sub-contractors involved in construction operations to which Relevant Contracts Tax applies but excluding haulage for hire.

Accountants should familiarise themselves with the new rules. In particular consideration must be given to the effect of the new rules in terms of the extended definition of a principle contractor as introduced in the FA07.

The dedicated section of the Revenue website which deals with the new rules is accessible at http://www.revenue.ie/index.htm?/leaflets/construction-services-new-rules.htm.