On the approval of construction contracts involving school authorities as the client, my Department advises school authorities in detail of the new requirements that are required to be adhered to and which have been introduced by the Revenue Commissioners relating to the operation of Relevant Contracts Tax (RCT).
In the first instance an explanation of the background to the new requirements is provided. In this regard, RCT is a tax regime applicable to construction contracts in which tax is deducted by a principal contractor from payments due to a contractor for construction operations. RCT applies to main contractors in their dealings with sub-contractors. The Revenue Commissioners have now decided that with effect from the 1st January 2012 school Boards of Management are regarded as "Principal Contractor". This means that the Board of Management undertaking works funded by the Department will be responsible for complying with RCT requirements and VAT returns when making payments to their contractor. The Revenue Commissioners have introduced a mandatory electronic RCT system for all principal contractors in the RCT system, so that all filings and notifications must be done online through the Revenue Online System (ROS). Full details of these new requirements are available on www.revenue.ie or from the local Revenue Office.
School authorities are further advised of the guidelines that should be followed to ensure compliance with Section 20 of the Finance Act 2011 as follows.
1. Register online for the Revenue Online Service (ROS).
2. Register with Revenue as a Principal Contractor and for Value Added Tax (VAT).
3. Obtain the Contractor's tax reference number and proof of identity.
4. Prior to commencement of construction, notify Revenue of the Contract (Contract Notification).
5. Prior to discharging any payment to the Contractor, notify Revenue of the payment (Payment Notification).
6. Obtain a Deduction Authorisation from Revenue specifying the tax to be deducted from the Contractor.
7. Provide the Contractor a copy of the deduction Authorisation.
8. Deduct the applicable amount of tax from payments due to the Contractor.
9. File RCT returns and pay the deducted amount to Revenue.
10. File monthly VAT returns and pay the VAT to Revenue.
11. Obtain and keep a Deduction Summary — Periodic Return at the end of each return period.
As the compliance outlined above involves school authorities with construction contracts interacting with the Revenue Commissioners on a regular basis, my Department considers that any issues or queries arising from the new procedures are directed by school authorities to the Revenue Commissioners.