eRCT – Issues to Discuss Now with Clients
Dear
The eRCT regime is to commence on 1 January 2012. There are some important questions members may wish to discuss with their principal contractor clients in the coming days to ensure that they are ready for the new regime.
Are the principals registered to use ROS?
If it is the case that a principal will be using the eRCT system, rather than their agent, the principal must be registered for ROS. Registration can take up to 10 days to complete, so it is important that the process is commenced immediately, for all unregistered principals.
Revenue are in the process of identifying principals who are not yet registered for ROS. Local districts may make contact with such principals in the coming weeks. Revenue propose to issue correspondence centrally early in the New Year.
Have the principals checked the contract details on the system?
While eRCT is not operative until 1 January, principal contractors have been allowed to access the system since last Monday to check the contract details pre-populated by Revenue from their records. It is important that they do check these to ensure the details are correct and complete and any necessary amendments or additions are made. If Revenue have not been notified of a contract, it will not be possible to obtain a “Deduction Authorisation”, which will set out the appropriate tax to deduct from a payment to a subcontractor.
Are they aware of the penalties that can apply if they pay a subcontractor without following the eRCT procedures?
Where a payment is made to a subcontractor without obtaining the appropriate authorisation from Revenue, the principal can be subject to a penalty of up to €5,000 in addition to tax at 35% (see Section 530F TCA97). Therefore, it is essential that principals are fully familiar with the eRCT process and follow the steps required.
There is an online information session available on Revenue’s website which takes you through the steps of using eRCT including the contract notification process. This can be accessed here.
What about subcontractors?
It is not essential for subcontractors to register for ROS. However, we understand that those who are registered can login now and see the contracts that principals have notified for them. They will also be able to see the deduction rate to be applied from 1 January. Letters are issuing centrally to all subcontractors in the New Year advising them of their deduction rate. As highlighted in our special Bulletin on eRCT in October, as a transitional measure RCT rates will be frozen for the first 3 months of 2012.
Subcontractors should be aware that interim refunds of eRCT will no longer arise, this may have cash-flow implications for them.
Kind regards
Cora O’ Brien
Director
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