RCT bulk rate review difficulties for construction sector

May 13, 2019

Members have been in touch to raise concerns about the difficulties faced by businesses operating RCT as a result of the recent bulk rate review (BRR) run by Revenue.  We in turn have brought these concerns to Revenue’s attention.  The main issue appears to be the rate increase of RCT withholding tax to 20 percent and 35 percent due to outstanding VAT Return of Trading Details (RTDs).  Chartered Accountants Ireland have requested that Revenue assist businesses in the restoration of lower RCT withholding tax rates given the damaging cash flow implications of withholding tax on much needed payments to the businesses concerned; many of whom have excellent tax compliance records.

As reported in eNews recently, Revenue’s annual RCT bulk rate review was carried out in April.  This year, a taxpayer’s VAT Return of Trading Details (RTDs) compliance record was factored into the rate review with the result that contractors with outstanding RTDs moved to higher RCT withholding rates of 20 percent and 35 percent. 

Revenue confirmed that its case workers are aware of the negative impact of increased RCT deduction rates on businesses and they will take a subcontractor’s compliance record into account.  Practitioners have told us that many of the contractors impacted by the RCT rate change hold tax clearance certificates although VAT RTDs are outstanding for 2018 and 2017 in particular.

Revenue place a great importance on RTD compliance.  Non-compliance results in issues with RCT withholding tax rates as currently demonstrated, along with tax clearance issues and delays in tax repayments.  

There are self-service options in ROS for agents/customers to (i) see the issues giving rise to a RCT deduction rate increase, and (ii) having fixed those issues, re-run the review to restore the pre-BRR deduction rate.  Guidance on the eRCT system, including the rate determination, is set out in Revenue’s Tax and Duty Manual 18-02-05.    We will continue discussions on the matter with Revenue on behalf of members.