Revenue Tax Briefing

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Revenue Tax Briefing Issue 51, October 2003

Integrated Taxation Processing RCT

Integrated Taxation Processing: Relevant Contracts Tax

Relevant Contracts Tax (RCT) will be incorporated into Integrated Taxation Processing (ITP) on a phased basis from December 2002. ITP forms part of Revenue’s significant investment in improving our computer systems and details of the project were set out in Tax Briefing, Issue 35 (March 1999).

The incorporation of RCT follows on the successful integration of PAYE/PRSI (Employers) in 1999, VAT in 2000, and the collection of Income Tax, Corporation Tax, Capital Gains Tax and several minor taxes including the Environment Levy in 2001.

How RCT operates

RCT applies to payments to self-employed subcontractors in the Construction, Meat Processing and Forestry Industries. Principal contractors are obliged to deduct tax at 35% from all payments to subcontractors in these industries unless the principal contractor has received a Relevant Payments Card in respect of a subcontractor. Application for a Relevant Payments Card is made jointly by the principal contractor and the subcontractor to the principal contractor’s local Inspector of Taxes. To apply, the subcontractor must hold a current C2 certificate of authorisation. A principal contractor who deducts tax during a month is obliged to make a return to the Collector-General and remit the tax deducted within 14 days after the end of the income tax month. A principal contractor who has received a monthly RCT 30 return form from the Collector-General is obliged to make a return, whether or not tax has been deducted in the previous month.

When incorporated into ITP, RCT will enhance the service provided for customers and agents. Repayments and offset of credit will be processed much quicker. Customers and agents who are registered for the Revenue On-line Service (ROS) will be able to file returns and view their RCT position over the internet. Revenue will have access to a wider range of data across taxes, which will improve our compliance management techniques.

Monthly Collection

Section 18 FA 1999 amended Sections 530 and 531 TCA 1997 and placed an obligation on a principal contractor to make a monthly RCT30 return to the Collector General and enabled Revenue to issue monthly estimates of RCT.

ITP will bring RCT in line with the collection procedures already in place for other taxes. From January 2003

  • A new style RCT30 Return will issue each month in advance of the due date for payment
  • Customers will be able to make a payment either by cheque, directly from a bank account using Single Debit Authority, or on-line through ROS. RCT30 return will include payment instructions.
  • Revenue will monitor the receipt of returns and payments on a monthly basis
  • Monthly estimates, reminders or demands will issue, as appropriate, where either a return or payment is not received for any month. Every principal contractor is obliged to submit an RCT 30 return, even where no tax was deducted from sub contractors during the month.
  • Failure to pay a monthly tax liability, or to pay on time, could result in enforced collection
  • There will be no provision, on the RCT35 annual return, for the payment of an annual tax balance - the customer will be expected to pay tax due on a monthly basis.

All notifications issued will advise the customer which Revenue office to contact for assistance.

Benefits for customers and agents

The inclusion of Relevant Contracts tax (RCT) in the ITP environment will extend the benefits already realised for PAYE/PRSI, VAT and Self-Assessed Taxes customers. Improvements to the service in the first phase will include:

  • Procedures for processing refunds /repayments and credits will be streamlined and enhanced
  • Transactions such as transfers and offsets of credits arising from RCT claims or overpayments against other outstanding liability, which previously took a considerable amount of time to arrange, will now be applied on-line and will have immediate effect on a customer’s account
  • A consolidation of financial records which will enable Revenue staff to access comprehensive information across different taxes to deliver faster and more comprehensive responses to customer and agent enquiries
  • Comprehensive statements of account will be available to customers and agents for all the major taxes
  • A wider range of payment options will be provided - cheque, direct debit through the Single Debit Authority, or on-line through ROS
  • The ITP platform will enable customers and agents to file returns and payments, to access account details and exchange information with Revenue electronically at any time, via ROS.

Enhanced Processing

The first phase also provides Revenue with an enhanced RCT collection and compliance process through the ITP system. In particular it supports the provisions of the Taxes (Offset of Repayments) Regulations 2001 and the Income Tax (Relevant Contracts) Regulations 2000 relating to the raising of estimates. It will allow Revenue to ‘look across’ all the major taxes before issuing a tax refund. Enhanced processing will:

  • Facilitate automatic processing of a credit (overpayment or repayment claim) occurring in a customer’s account by either setting the credit against other liabilities (subject to provisions of Section 1006A TCA 1997)or making a direct refund/repayment. The credit may be offset against an underpayment in any tax - RCT, Employer’s PAYE, VAT, Corporation Tax, Income Tax, and Capital Gains Tax. If a credit is offset against unpaid tax Revenue will issue the customer with a statement identifying details of the offset
  • Facilitate analysis of the status of returns before issuing a refund. A refund may be held pending receipt of overdue returns. If a refund is held Revenue will issue the customer with a notice detailing overdue returns.

Next steps

Further phases planned for 2003 will provide for

  • Automation of the RCT 2 application and renewal processes
  • Issue of all forms through the ITP system
  • Fully automated processing of credits remaining in a customer’s account, subject to pre-defined rules
  • Filing the Form RCT 35 through the Revenue On-line Service.

Further information

The Collector-General is issuing an information leaflet with the Form RCT30 for January 2003 and copies will be available on the Revenue website www.revenue.ie. Information on the Revenue On-line Service developments is available at www.ros.ie. Copies of the Regulations are also available on the Revenue website or from the Government Publications Office, Molesworth Street, Dublin 2.

The Income Tax (Relevant Contracts) Regulations 2000 (S.I. No. 71 of 2000) came into effect on 6 April 2000. ITP will support the enforcement of these regulations and in particular:

Regulation 13 provides for a monthly estimate of tax due by a principal contractor in respect of RCT deducted from subcontractors. The estimate will be raised by the Collector-General and will apply where a principal contractor fails to remit tax deducted or fails to make a monthly return to the Collector-General, on form RCT 30, or both. The principal contractor may appeal to the Appeal Commissioners within 30 days of the notice of the estimate or may displace the estimate by making a return for the month and paying the tax due in accordance with that return. Where court proceedings for recovery of tax charged in an estimate have commenced or where the tax charged has been referred to the county sheriff or registrar for collection, the estimate may not be displaced unless the Revenue Commissioners otherwise direct, until the collection action has been completed.

It should be noted that every principal contractor is now obliged to submit an RCT 30 for each month, even where no tax was deducted during the month. Failure to do so will result in estimates being raised. Each Form RCT 30 will be issued out of ITP with a payslip that refers to that customer only and should be used only as that customer’s return.

Regulation 14 provides for an annual estimate to be made on principal contractors by the Inspector of Taxes or other nominated officer. Self-assessment procedures are now applied to any such estimate. In particular, a principal must make all returns due and pay any tax due in accordance with that return for the period of the estimate before an appeal can be made. The Inspector, in accordance with Section 955 TCA 1997, may amend the estimate. It may be made during a tax year and may also extend to two or more tax years.

Regulation 15 provides for computer-produced estimates in accordance with Regulations 13 or 14. The regulation is similar to Section 959(2) TCA 1997 which applies in relation to self-assessment.

The incorporation of RCT into ITP will enable the issue of computer produced estimates as provided for in Regulation 15, and ITP will automate the issue of follow up demands and notices. It is important therefore that all forms RCT 30 and RCT 35 are completed accurately.