Online RCT – the new system
The new online system for relevant contracts tax came online as of 1 January 2012. The system is now mandatory and paper returns will no longer be accepted. For more detail on what constitutes a relevant contract, please click here.
In order to use the new service, principals are advised to register for the Revenue Online Service which will allow individuals to liaise with Revenue on all matters related to RCT or any other taxes relating to their business.
The principal new requirements of the online system are the “contract notification” and “payment notification” obligations, outlined below.
Contract notification
When a principal enters into a relevant contract with a subcontractor, he/she will be obliged to provide Revenue with details of the contract online, including a declaration that the contract being entered into is not a contract of employment. Revenue have issued a guidance note for people entering into relevant contracts from 2012 onwards. It is available here.
Payment Notification:
Under the new system, principals must notify the Revenue before they make payments to subcontractors. Once Revenue has received the notification, they will issue a Deduction Authorisation which advises the principal what level of tax should be withheld and paid over to Revenue. The amount to be deducted will be one of the following percentages:
0% – for subcontractors who are registered and up to date with their taxes.
20% – for subcontractors who are registered and substantially compliant.
35% – for subcontractors who are not registered and/or not compliant with their tax obligations.
Revenue has produced a video illustrating online payment notifications below:
Penalties
Failure to adhere to the new system can attract stiff penalties. Under section 530F TCA 1997, where a payment is made to a subcontractor without obtaining the deduction authorisation from Revenue, the Principal may be subjected to a €5,000 penalty in addition to tax at 35%.
