Vol. 495 No. 1
227 Mr. McGuinness asked the Minister for Finance the extent of the use of the C45 system of payment; if his Department or the Revenue Commissioners have a national policy to reduce its use as a payment method; if contractors who currently use the system will be allowed to continue; and if he will make a statement on the matter. [19249/98]
I am informed by the Revenue Commissioners that relevant contracts tax (RCT) applies to payments made by principal contractors to self-employed subcontractors in the construction, forestry and meat processing industries. Unless the subcontractor is a C2 holder in respect of whom the principal contractor has received a relevant payments card, principal contractors are obliged to deduct tax at 35 per cent from payments to subcontractors in these industries and to give the subcontractor a form RCT DC (formerly a C45), which is a certificate of deduction.
RCT does not apply to payments between an employer and employee; such payments are within the PAYE system. Where an employer fails to deduct income tax, PRSI and levies under PAYE in respect of such payments, the employer is liable for the tax etc. which he should have deducted from such payments. The employer is also liable to account for the employer's portion of PRSI on such payments.
I am informed by the Revenue Commisioners that where any cases come to light of payments to employees being categorised as payments to self-employed subcontractors, the tax etc. which should have been deducted is charged on the employer in question. As part of its ongoing audit programme, Revenue examines whether the correct deductions have been made from various payments. Similarly, I am informed that the commissioners make every effort to ensure that RCT is not applied to payments which should correctly be classified as employer-employee payments.
The nature of the relationship between the person making payments and the recipient is a question which can only be decided by an examination of all the relevant facts. Neither my Department nor the Revenue Commissioners can dictate to the parties to a contract what the nature of that contract should be. To the extent that the contract is one of self-employment, RCT applies to payments made under that contract.
The Revenue Commissioners regard RCT as a valuable tool in ensuring that the correct tax is paid in respect of certain contracts of self-employment and there is no policy to reduce its use. In fact, the Finance Act, 1998 extended the application of RCT in the meat-processing industry.
