Every year in Ireland, Subcontractors in the construction, forestry and meat-processing industries are required to file an income tax return. Here at Tax Return Plus, we receive a lot of questions around Relevant Contracts Tax for Subcontractors regarding who qualifies as an RCT Subcontractor and the filing process. That’s why we’ve compiled the answers to our most frequently asked questions around income tax returns for RCT Subcontractors in this short guide.
1. What is RCT?
RCT is a withholding tax that applies to certain payments by a Principal Contractor to Subcontractors in the construction, forestry and meat-processing industries. Under the RCT system, a percentage of the payment from the Primary Contractor is deducted and paid directly to the Revenue Commissioners. The percentage rate varies depending on each Subcontractor’s individual tax compliance records.
When the RCT Subcontractor completes their annual income tax return, any RCT that a Primary Contractor has deducted from the individual, can be applied against their income tax bill.
2. Does an RCT Subcontractor have to file an income tax return?
Yes. RCT Subcontractors who carry out or are responsible for what is referred to as ‘relevant operations’ are required to file an income tax return (Form 11). Relevant operations refers to a variety of trades, most commonly in the construction industry.
Construction tradespeople such as builders, blocklayers, plasterers, electricians, plumbers, window installers, scaffolders, grounds persons and excavation services are only a few examples of RCT Subcontractors who are required to file an income tax return.
With such a wide variety of trades who qualify as an RCT Subcontractor, we’ve outlined a few examples from the construction industry below.
Tradespeople hired for:
• Preparatory operations for construction, alteration, repair or extension of building
• Development, alteration, repair or extensions of buildings
• Demolition or dismantling of buildings, walls docks and roadways as well as preparatory operations related to this work.
• External or internal cleaning of buildings or site during construction or post demolition.
• The installation of windows, heating, lighting, air conditioning, ventilation, etc.
• The repair or installation of plumbing systems such as pipes, water supply and drainage systems.
3. What are the filing dates for income tax returns?
Each year, RCT Subcontractors are required to file an income tax return by the 31st of October. All Subcontractors must submit their 2019 tax return by October 31st, 2020. It is important to ensure you have filed your taxes by this date, otherwise you will be subject to large penalties resulting in an increased rate of tax from the Revenue Commissioners. Learn more about tax return deadlines here.
4. Are there penalties for not filing a tax return on time?
Despite being in effect for several years, the RCT scheme is generally where the most errors occur. Because of this, the Revenue Commissioners are increasingly targeting the construction sector with audits as RCT errors can be easy to identify and have high yielding penalties for both Primary Contractors and Subcontractors.
If an RCT Subcontractor does not file their income tax return, they fail to be tax compliant and their rate of RCT will increase from 0% to 20%. Even further, if the RCT Subcontractor has not been tax compliant for several years, their rate of RCT will be as high as 35%. Penalties on late returns will also result in a 5-10% increase on the tax liability. See here for more information on rates of tax for RCT Subcontractors.
It is the Primary Contractor’s responsibility to notify the Revenue Commissioners when they have entered into a contract with a Subcontractor; however, to ensure you are fully tax compliant as a Subcontractor it is worth double checking that the Primary Contractor has done so.
5. How can I claim back RCT in Ireland?
Any RCT that the Primary Contractor has deducted from an individual and paid over to the Revenue Commissioners can be offset against tax due. At Tax Return Plus, we help RCT Subcontractors all over Ireland to correctly file their income tax returns and avoid large penalties.
Our Accountants provide a fast, affordable and professional tax return service starting at €249 for RCT Subcontractors. To get started, simply complete the form and we will be in touch with your quote within 1 working day.