eRCT - Important Information on 2012 Regime
Dear
Only 2 months remain until a fundamental change in the RCT regime, planned for 1 January 2012. Anyone with clients who are principal contractors or subcontractors should read today’s bulletin from the Policy and Technical Team. This provides an overview of the new eRCT regime and information on transitional arrangements members may not be aware of. We also highlight what your principal and subcontractor clients need to do now to prepare for the new system.
An Overview of the New System
Under the new system, currently under development, interaction between principal contractors and Revenue will be solely online. There will be no paper alternative. There will be a number of key stages in the process for a principal.
- Each relevant contract must be notified to Revenue online upon entering a contract and before any payment is made. Once notified, Revenue will provide an indication to the principal of the RCT rate applicable.
- Before the principal makes each payment to a subcontractor they must notify Revenue. Revenue will issue a "Deduction Authorisation" at this point confirming what rate of RCT applies (i.e. 0%, 20%, 35%) and the tax to be deducted.
- At the end of the relevant RCT return period (i.e. monthly/quarterly) Revenue will issue a "Deduction Summary" containing details of payments advised to them. This operates as a return and the principal will need to review it carefully, amend it if required and pay the related tax due.
Regulations on eRCT are expected to be published by Revenue shortly.
Transitional Arrangements to Apply in 2012
Revenue are providing some arrangements to "smooth" the transition to the new regime.
RCT rates are to be frozen for the first 3 months
The rates of RCT, that Revenue will notify to the principal, will be frozen for the first three months of the system i.e. until 31 March 2012. This means that the 0% rate will apply to those who currently hold a valid C2. The 20% rate will apply to all others, except where the subcontractor is unknown to Revenue. In such cases the 35% rate will apply.
Revenue intend to pre-populate contract information
You should note that the new regime does not only apply to new contracts, it also applies to contracts currently in place, where payments will be made after 1 January 2012. As a once-off measure, Revenue intend to pre-populate the basic contract details for all principals. This will be based on contract details provided to Revenue in 2010 (through the RCT 35) and on contract details for 2011 where payments cards (RCT47) issued. Principals will be able to access the new system from 28 November 2011 to check the details input are correct.
Multiple contracts with one subcontractor – one notification
For 2012 only, where a principal has multiple contracts with a particular subcontractor only one contract notification will be required. Thereafter, each contract must be separately notified to Revenue.
What Clients Need to do to be Ready for 1 January
If you have clients who are principals or subcontractors the following tips may be helpful:
Principals
- Those not already registered for ROS should register as soon as possible.
- It is important that principals ensure before 1 January that details on ROS for their existing contracts are correct. These details, pre-populated by Revenue, can be viewed, amended, cancelled or updated from 28 November.
- Principals with in-house RCT software systems should engage with their IT experts or software providers to ensure their systems are compatible with ROS.
Subcontractors
- Subcontractors are not required to register for ROS for RCT purposes. However, ROS access will allow them keep track of the RCT payments credited to their account with Revenue.
- Subcontractors will not receive any interim refunds of RCT during the year. This may have cashflow implications for them, particularly if they have tax withheld at the 35% rate. It may therefore be timely to review whether a lower withholding rate could apply. Those not registered with Revenue or who have "serious compliance issues" will be subject to the 35% rate.
- In the absence of a C2, new tax clearance arrangements will be put in place for those subcontractors engaged by Government departments. Revenue will be providing further information on this aspect shortly.
Revenue are hosting information sessions on the new system around the country for principals and subcontractors. Details of their times and locations are available here. They have written to those on their records, to advise them of the new regime and are developing their website with FAQs, online demonstrations and videos.
Following the popularity of our recent Dublin seminar with Revenue on eRCT, the Institute is holding another seminar with Revenue, in Athlone on 29 November. It will cover the key aspects of the new regime from a practitioner and Revenue perspective. For more details on this event access our website.
The Institute has been engaging with Revenue on the developing regime through TALC and on a one-on-one basis, emphasizing the importance of a user-friendly system and highlighting members’ feedback. We will be providing further updates on eRCT through our publications and seminar programme over the coming months.
Kind regards
Cora O’ Brien
Director
Policy and Technical Team
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