New VAT & RCT Guidance for School Boards

May 23, 2016

Revenue have issued new Guidance Notes for School Boards of Management on how Relevant Contracts Tax (RCT) and VAT affect school building projects and repairs & maintenance works.

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The RCT tax system applies to construction contracts where a principal contractor deducts tax from payments due to building contractors and tradesmen.

Since 2012, school Boards of Management have been counted as ‘Principal Contractors’ for RCT purposes.

Where a Board of Management undertakes construction works (including associated repairs or alterations to a building or structure), they  must operate RCT procedures on all payments to contractors.

In addition, they must file VAT returns, and make VAT payments in respect of VAT withheld under the Reverse Charge system.

There are serious penalties for failing to comply with these obligations, so school Boards should take special care to ensure that their VAT and RCT affairs are fully in order.

If you’re not fully certain of what exactly to do, avoid a potential nightmare by getting proper professional advice.


The Tax Mistakes Builders & Tradesmen Are Making

March 25, 2016

Last August, the Revenue Commissioners warned builders and tradesmen to ensure they remain tax compliant as the construction industry recovers from the downturn.

They have obviously been busy in this area in the meantime, as they have now publicly flagged their concerns on some key areas where mistakes are being made.

These centre on the incorrect operation of the VAT Reverse Charge and Country Money systems.

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Under the VAT Reverse Charge system, each VAT-registered sub-contractor invoices a principal contractor net of VAT, and is paid the invoice total net of VAT.

The principal contractor must then calculate the appropriate VAT on the the sub-contractor’s invoice and must pay that VAT amount directly to Revenue in their VAT return.

Revenue have now highlighted the following specific problems in this area:

  • Failure by Principal contractors to calculate the VAT and remit it to Revenue.
  • Incorrect completion of VAT invoices by sub-contractors.
  • Incorrect application of the two thirds rule.
  • Errors in completing VAT returns (including ignoring the reverse charge altogether).
  • Failure to apply the VAT Reverse Charge to construction supply transactions between connected parties.

They have also issued a fresh reminder of the strict conditions for tax-free Country Money travel and subsistence payments  to transient building & electrical contracting workers.

In addition to the above issues, it almost goes without saying that full compliance with the Relevant Contracts Tax or eRCT system is absolutely essential for every contractor and sub-contractor in the building trade.

This system requires every contractor to register all contracts with, and payments to, all subcontractors, and obliges the contractor to deduct a percentage of tax from each payment where Revenue request this.

If you are a builder, tradesman or contractor, and have had difficulties or issues in complying with the various regulations, you may be liable to interest and penalties on any tax shortfall.

You can minimise your exposure by making an “unprompted voluntary disclosure” to Revenue and settling your tax, penalties and interest liabilities ahead of any Revenue audit or enforcement check on your business.

If you are considering such an option, I strongly recommend that you first obtain decent professional advice to protect your interests and ensure that you qualify for the concessions offered by the Revenue Audit Code of Practice.

Finally, here is the new Revenue eBrief outlining the above issues.

Tradesmen: Revenue Big Brother Is Watching You

February 28, 2014

Revenue have recently used aggregated data from their electronic Relevant Contracts Tax (eRCT) system, to monitor and adjust the tax compliance rating of thousands of construction tradesmen and other sub-contractors.

The eRCT system came into operation on 1st January 2012, and applies to contractors in the construction, forestry and meat processing sectors.

It enables Revenue to pre-approve payments to sub-contractors, and have tax deducted from these payments.

Contractors must use the Revenue ROS platform to notify Revenue of each individual payment to their sub-contractors.

Depending on each sub-contractor’s individual tax record, Revenue will instruct their contractor to deduct zero, 20% or 35% tax from each gross payment.

RCT eRCTLast Friday, 21 February, Revenue conducted a “Bulk Rate Review” of their eRCT data, and have now used the results of this review to upgrade or downgrade the tax compliance rating of 19,130 sub-contractors.

There are 3 ratings used:

  • No tax deduction will apply where a subcontractor is fully compliant with his/her tax obligations
  • A 20% deduction will apply where a subcontractor is “substantially compliant”, and
  • a 35% deduction rate will apply where the subcontractor is unknown to Revenue or has outstanding tax compliance issues.

Revenue are now writing to affected sub-contractors to notify them of the changes to their eRCT ratings.

Meanwhile, in today’s Revenue eBrief, Revenue also confirmed that sub-contractors on the 35% deduction rate (ie, those with outstanding tax compliance issues) will NOT qualify for the Home Renovation Incentive (HRI) scheme.

The HRI scheme allows householders to claim a 13.5% tax credit on the cost of improvement works in their homes.

The message to tradesmen and sub-contractors is clear: Be very careful, Revenue’s Big Brother is watching you.

Today’s eBrief is here. See also Revenue’s Guide to Electronic RCT.

Tonight’s Tax Return & Payment Deadlines

January 23, 2013

Don’t forget that midnight tonight (23 January) is the deadline for filing the following tax returns:

  • Employer PAYE/PRSI P30 monthly return for December 2012 & quarterly return for the period October – December 2012
  • VAT3 return for periods ending in December 2012
  • RCT December 2012 monthly return for December 2012 & quarterly return for the period October – December 2012.

You must file each return online using ROS, and each return must be accompanied by your corresponding tax payment.

Tax Deadlines

In addition, tonight is also the deadline for

  • payment of Preliminary Corporation Tax, if your 2012/13 company accounts year ends in February 2013; and
  • filing of your Corporation Tax Return and payment of any remaining tax owing, if your 2011/12 company accounts year ended in April 2012.

For a full list of all Revenue tax deadlines in 2013, see the Revenue Key Dates Calendar. Note the extended filing dates for returns filed electronically via ROS.