Changes to RCT in 2012
Last Updated: 18th November 2011
If you are a Principal Contractor or a Sub Contractor please read the following very carefully.
We also encourage you to read all sections if you are a subcontractor only, so you can understand further how the changes affect you.
We will endeavour to update these notes as the new system comes live and if Revenue announces any changes, so please bookmark this page for future reference and check back and view the notes online to ensure you have our latest notes. You will note the change to the version by the date at the top of this document.
These notes are not intended to be comprehensive and are just provided as an overview of the main changes. The following notes are split into sections as follows (clink on section titles to jump to section)
Principal Contractor Notes
As you are probably now aware Revenue is going online with all taxes as time goes on, RCT is the next on their list.
Revenue has published a video on youtube which they have on their website via the following link. It is broken down into different parts.
New eRCT System main highlights are as follows,
• No Paper forms at all
• No longer a C2 card
• Must be done online via ROS, no other option at all
• 3 rates of RCT 0%, 20% and 35%
• System will be live in part from 5th December 2011 to notify contracts only
• Full System will go live from 1st January 2012
• With new system you cannot make a payment to a subcontractor without notifying Revenue.
• ROS online and/or ROS offline to be used
• The following notifications must be supplied to Revenue via online
o Contract notification
o Payment Notification
o How much tax to deduct from sub-contractors payment instantly given
o Deduction Return Summary
• Meat Processing
Why is Revenue making the change to online?
• Too much paper being used under current system, about 1 million pages per year at the moment
• Standard Rate too high at 35%
• Easier to complete monthly or quarterly returns compared to the old RCT30’s as Revenue will issue summary page with details already supplied.
• RCT35 form (annual return) will be gone as Revenue will now have all details of contracts
• Current Payment Cards gone
• Sub-Contractors will no longer receive the RCTDC page to claim the deducted tax back.
Subcontractors are not currently obliged to register for ROS, but if registered the advantage is that they can see what contracts are registered under their name.
For Agents there will be more work if clients are looking for their agent to act on their behalf for the principal.
PRINCIPAL CONTRACTOR NOTES
On ROS online the area will be on the bottom left of the screen
You can upload 10 contracts for each batch and an unlimited number of batches.
You can upload 100 payment notifications per batch and again you can upload unlimited number of batches.
You can also view previous payments and old contracts notified to Revenue via this screen.
Since there is no longer a C2 card it is the Principal Contractors’ responsibility to ensure that some official form of photo ID is kept, for example, drivers licence, passport etc.
Notify Revenue of the contract as soon as it is agreed as you will need to do this before you can request a payment authorisation from Revenue.
You will need the Subcontractor’s Tax Reference number; if you do not have this you tick a box on screen and it will require you to enter more contact details on the subcontractor. This will also happen if the number supplied by the subcontractor is incorrect. If this happens the rate that will be deducted is 35%
If this happens the principal must write to the subcontractor that there was an issue with the tax number supplied within 7 days from the start of the contract.
Revenue will also make contact with the subcontractor.
If a labour only contract further questions will be asked for example, materials, insurance etc., but the details required are the same as for the current RCT1 form.
On submission there will be instant acknowledgment of the contract.
No payment can be made unless contract notified to Revenue online.
You can amend details as follows after notification of contract to Revenue;- location, value and end date, all other changes must be notified to Revenue directly in writing.
If you have multiple invoices to pay you may only make one payment notification if you wish, while the new system is being introduced; it is proposed that this will change in the future.
You enter your gross payment amount – Gross ex VAT if construction or VAT exclusive for other industries.
There will be penalties if Revenue is not notified of payments before payment is made.
However, if ROS is down or there is a technical reason why you cannot notify Revenue in advance you must notify Revenue online of the payment as soon as possible afterwards, there will be a box to tick that it is a post payment. Revenue has said that they will monitor this button closely and penalties could be applied if no real reason for it to be used.
If you are making a payment and cannot notify Revenue per above online, you must use the rate given by Revenue at the time the contract is notified to Revenue, if not sure or not available you must use 35%.
Payment Authorisation Notification Number will be returned to your ROS inbox, it will tell you how much tax to deduct and what the net payment will be.
A copy of this authorisation must be given to subcontractor, or alternatively in email or writing but must be agreed in advance.
The tax you deduct will go over to the subcontractor’s tax record straight away and the subcontractor will see these online too (see below for more information on subcontractors)
If there is an error you can cancel the payment within the return period (i.e. within the RCT30 return period), however you can only change gross but anything else you must cancel the payment and start again.
The new Deduction Summary replaces the RCT30 forms.
This form will be prepopulated with the list of payments made within the return period line by line. The Principal must check these before payment to Revenue can be made, you can amend the line item as mentioned earlier however this must be done before the due date of the return.
If after the due date of the return you have to add a payment you cannot do this but will have to notify the tax office and penalties and surcharges and interest will be charged.
In summary the following penalties apply to the the new system, some of which are new as a result of the new system:
Section 530F – Payment without notification to Revenue
Section 530M – €100 surcharge for late or amended return
Section 1078 – Failure to deduct tax
Section 1052 – Interest and penalties on overdue tax
As mentioned earlier there are 3 rates of RCT that can be deducted.
0% – Those who currently have a C2 or who are compliant for Tax
20% – Are for those who “Complied Substantially”
35% – Exceptional Circumstances, including where a contractor is “Unknown” per earlier, no tax number or tax number incorrect or where there are serious compliance issues i.e. taxes outstanding and or returns outstanding
For the first 3 months rates will be frozen until 1st April 2012.
Please note that there will be no more C2 cards.
Tax deducted will be on your RCT screen on ROS almost immediately after input by the principal; if the principal amends or cancels the payment/contract this will be updated on your record accordingly.
The tax deducted will only be available for offset against Corporation Tax or Income Tax if a sole trader and other tax liabilities during the year. Please remember that there will be no refunds during the year whatsoever.
Repayment will only occur after your own tax year, if you’re a company this will be our Corporation Tax year end or if a sole trader the calendar year end.
Your Corporation Tax return or Income Tax return will need to be filed before any refund can be processed. In addition you must have all of your current tax records up to date.
Finally – What do I need to do now?
1. Register for ROS, currently takes 10 days, if we act as your agent and have your ROS certificate; please speak to us to arrange for an additional certificate to be created or to send you the certificate.
2. Go online after 5th December 2011 to review what’s there.
3. Revenue will notify what rate you are on via ROS if registered or via post if not registered for ROS
4. View the online video when available from Revenue, link available at top of this page.
5. View the FAQ website, link below for more information
6. Ensure you register contracts leading up to 1st January 2012
If you have any questions or wish to discuss the new changes please feel free to contact Joe Bingham at 044 937 4915.
At Royal Canal Financial Control Service we can offer you onsite training and walk through when the system is live for you and your staff to better understand the new system, if you would like to enquire about this service offering please contact us for a quote.
Whilst every care has been taken in the production of this summary, neither Royal Canal Financial Control Services nor Ronan Duffy and Co. can be held responsible for any action taken or deferred, resulting from any errors contained therein.