Relevant Contracts Tax (RCT)

RCT for principal contractors

Who is a principal contractor?

Relevant Contracts Tax (RCT) is a tax deduction at source system that applies to payments made under relevant contracts.

You are a principal contractor if you use a subcontractor to carry out activities on behalf of your business. This applies to:

• construction
• meat processing
• and
• forestry.

You are also a principal contractor if you:

• are connected to a company involved in any of the above activities
• are a local authority, public utility society or housing association
• are a Government Minister
• are a board or body established under statute
• are a board or body established under royal charter and funded mainly by the Oireachtas
• carry on any gas, water or electricity work
• carry on any hydraulic power, dock, canal or railway work
• or
• carry out the installation, alteration or repair of telecommunications systems.

Principal contractors must register with Revenue.

You are not a principal contractor if the only construction work that you are involved in is on buildings or land that are either:

• for your own use
• or
• for the use of your employees.

If you are a principal contractor, you must make all transactions with Revenue electronically through the Revenue Online Service (ROS). You should:

1. Notify us of all relevant contracts.
2. Notify us of payment details.
3. Provide details to the subcontractor of the tax you will be deducting.
4. Submit a deduction summary, which is a monthly or quarterly return
5. Pay us the RCT deducted from payments made to subcontractors.

Subcontractor or employee?

As a principal contractor, you must decide whether your contract is with an employee or a self-employed person.  The Supreme Court judgment in the Karshan case outlines five questions to help you decide.

The five-step decision-making framework involves the following questions:

1. Does the contract involve the exchange of a wage or other remuneration for work?
2. Has the worker agreed to provide their services personally and can they sub-contract their work?
3. Does the business control what, how, when and, or where the work is done?
4. What do the facts and circumstances say about the true nature of the relationship between the business and the worker?
5. Is there any legislation that would change the answers to any of the above questions?

For further information, please see the Tax and Duty Manual Part 05-01-30. The judgment is available on the Courts Service website

You might incorrectly register a contract of employment as a relevant contract for RCT. If this happens, you will have to pay the Pay As You Earn (PAYE), Pay Related Social Insurance (PRSI) and Universal Social Charge (USC) that you should have deducted. You may also have to pay interest or penalties. 

Next: Notifications for principal contractors