Relevant Contracts Tax (RCT)

Definition

Relevant Contracts Tax (RCT) is a withholding tax that applies to payments made by a principal contractor to a subcontractor in the construction, forestry and meat-processing sectors. Before paying a subcontractor, the principal must notify Revenue of the contract and each individual payment via the Revenue Online Service (ROS). Revenue then returns a deduction rate of 0%, 20% or 35% based on the subcontractor's tax compliance record. The principal withholds that percentage and pays it to Revenue; the subcontractor claims the credit back through their annual return. A linked rule is the VAT Reverse Charge for construction services: where both parties are RCT-registered, the subcontractor invoices net of VAT and the principal accounts for the VAT in their own VAT3 return. The two rules are separate but interact, since the same Revenue contract notification establishes the parties' RCT status and triggers the reverse charge treatment.

Why it matters for software choice

Getting RCT or the construction VAT reverse charge wrong is the most common compliance failure for small Irish construction firms. Accounting and payroll software that does not natively handle RCT contract notifications, deduction rates and reverse-charge VAT will force manual reconciliation in spreadsheets and increases the risk of Revenue interventions or interest charges on underdeducted amounts.

Authority sources

• Revenue: Relevant Contracts Tax (RCT) (www.revenue.ie)
• Revenue: VAT Reverse Charge for construction services (www.revenue.ie)

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