Relevant Contracts Tax (RCT) applies to payments made by a principal contractor to a subcontractor under a relevant contract i.e. a contract for the carrying out of, or the supply of labour for the carrying out of, relevant operations in the construction, meat processing and forestry industries. Tax is deducted by a principal contractor on payments to a subcontractor as advised by Revenue.
The scheme applies only where the relevant operations are performed under a relevant contract with a principal as defined in the RCT legislation.
For example if a private householder engages a builder to build an extension this is technically a relevant contract. The builder is working as a sub-contractor for the householder and carrying out a relevant operation in the construction industry. However, because the householder is not a “chargeable principal” i.e. a principal as defined in Section 531 Taxes Consolidation Act, 1997, RCT does not apply to any payments made to the subcontractor.
The definition for principal contractors includes “any board or body established by or under statute … and funded wholly or mainly out of funds provided by the Oireachtas”. As such, school Boards of Management are principal contractors for the purposes of RCT.
RCT is a withholding tax system whereby a principal contractor deducts tax at 35% or 20% from payments to subcontractors as advised by Revenue on the ROS system.