RCT explained, for subcontractors.
What Relevant Contracts Tax is, what the 0%, 20% and 35% rates mean, why there's no VAT on your invoice to a main contractor, and exactly what that invoice needs to say.
RCT in one minute.
Relevant Contracts Tax (RCT) is the tax system for payments in construction, forestry and meat processing in Ireland. When a principal contractor (the main contractor, or a developer) pays a subcontractor for construction work, they have to tell Revenue about the contract and about each payment, using eRCT on ROS.
Revenue then tells the principal what rate of tax to hold back from that payment: 0%, 20% or 35%. The principal pays what's held back to Revenue, and it counts as tax you've already paid.
0%
Registered with Revenue and up to date with your tax. Nothing is held back; you get the full amount.
20%
Registered, but not meeting all the conditions for 0%. A fifth of each payment goes to Revenue on your behalf.
35%
Not registered for tax, or with serious problems on your tax record. Over a third is held back.
The rate is worked out on the payment before VAT. Revenue sets it for you, not the principal, and you can see it on your ROS account.
VAT on RCT work: the reverse charge.
For construction work you do as a subcontractor for a principal contractor, you don't charge VAT. The principal contractor accounts for the VAT instead (the "reverse charge"). So your invoice:
- shows the price of the work with no VAT added
- has the wording "VAT on this supply to be accounted for by the principal contractor"
- shows your VAT number and the principal contractor's VAT number
Work you do directly for a homeowner or a business that isn't a principal contractor is normal VAT work: you charge VAT as usual.
An example.
| Your invoice to the main contractor (no VAT) | €10,000 |
| Your RCT rate on ROS | 20% |
| Held back and paid to Revenue by the principal | €2,000 |
| Paid to you | €8,000 |
| VAT | Accounted for by the principal |
The €2,000 isn't lost: it's credited against your income tax or corporation tax, or can be repaid if more was held back than you owe.
How Atsus does it for you.
- Mark a customer as an RCT principal contractor and put in your RCT rate and their VAT number once
- Their invoices go out with no VAT, the reverse-charge wording and both VAT numbers
- Money shows what you'll actually receive after the deduction, so your cash forecast is real
- Other customers keep getting normal VAT invoices
This guide is a plain summary to help you understand RCT. It isn't tax advice, and the rules can change: check revenue.ie or ask your accountant for your own situation.
Questions
What is RCT in Ireland?
Relevant Contracts Tax is the system for payments to subcontractors in construction, forestry and meat processing. The principal contractor tells Revenue about the contract and each payment, and holds back tax at 0%, 20% or 35%, as Revenue tells them.
Do I charge VAT on RCT work?
Not on construction work you do as a subcontractor for a principal contractor. The principal accounts for the VAT under the reverse charge. Your invoice shows no VAT, the wording 'VAT on this supply to be accounted for by the principal contractor', and both VAT numbers.
Who decides my RCT rate?
Revenue does, based on whether you're registered and your tax record. You can see your rate on ROS, and the principal is told it when they notify the payment.
Is the RCT deduction worked out before or after VAT?
Before VAT. The rate applies to the payment for the work, not including VAT.
Do I get the RCT that's held back?
Yes. It's credited against your income tax or corporation tax, and anything held back over what you owe can be repaid.
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