RCT – Relevant Contracts Tax

A school board of management, in its capacity as a body established by statute and funded wholly or mainly from funds provided by the Oireachtas, is designated as a “Principal Contractor”.

Boards of Management can be involved in a range of activities including: Construction Projects, Summer Works, Emergency Works, Major Devolved Projects, Additional Accommodation Schemes as well as day to day repairs that bring them within the scope of Relevant Contracts Tax (RCT) and, as a consequence, Value Added Tax (VAT). The board of management is responsible for complying with RCT requirements and VAT returns when making payments to the building contractor.

It is important that boards are aware of and understand their obligations in relation to these taxes. The regulations also apply to minor works if they are construction operations where the board of management is the client regardless of how they are funded.

Principal contractors must register with Revenue and all transactions with Revenue must be made electronically through Revenue Online Service (ROS).

IMPORTANT NOTE:

1. RCT does not apply to professionals such as architects, surveyors etc.
2. Schools are not entitled to reclaim the VAT on goods or services
3. All transactions with Revenue must be conducted electronically through Revenue Online Services (ROS)

Training Video

Click on the link below to watch a short video on an introduction to RCT covering an overview of what is subject to RCT and not subject to RCT.

Watch video

In any building project the board of management is the client or employer. As such, the board is the principal contractor for the purposes of the legislation. The board therefore has the responsibility of

• Notifying the contract to the Revenue authorities prior to commencement of construction
• Notifying each payment to the Revenue prior to making payment to the building contractor
• Deducting the appropriate RCT from the payment due to the building contractor as notified by the Revenue and paying the appropriate amount to the Revenue.

The board must obtain a Deduction Authorisation from the Revenue prior to making any payment to the building contractor. This authorisation will specify the rate of RCT to be deducted. Any contract subject to RCT is also subject to a “reverse charge” VAT mechanism.

> Further information on VAT Reverse Charge

It is important to note that the regulations also apply to repair works if they are construction operations where the board of management is the client regardless of how they are funded. Repair works would include repairs to heating or plumping system, window replacement, repairs or upgrades to security systems.

• • Inform the Revenue at the design stage that the school is undertaking a building project and seeking confirmation that the school’s board of management will be treated as the Principal Contractor for the building/construction contract
  • If not done so already, register online for ROS (Revenue Online Service)
  • If not done so already, register for VAT and RCT as a principal contractor
  • Obtain a contractor’s tax reference number and proof of identity
  • Prior to commencement of construction, notify the Revenue of the contract (Contract Notification)
  • Notify the Revenue prior to making any payment to the building contractor (Payment Notification)
  • Obtain a Deduction Authorisation from the Revenue specifying the tax to be deducted from the building contractor
  • Provide the contractor with a copy of the Deduction Authorisation
  • Deduct the applicable amount of tax from payments due to the contractor
  • File RCT returns and pay the deducted amount (if any) to the Revenue
  • File bi-monthly VAT returns and pay the VAT to the Revenue
  • Obtain and file a Deduction Summary at the end of each return period
  • Place a copy of the contract notification, payment notification, contractor invoice and deduction summary on the RCT file.