Relevant Contracts Tax – getting on top of Revenue’s bulk rate review
30 March, 2022
Revenue recently began contacting subcontractors (those subject to relevant contracts tax, or RCT, in relation to payments received) concerning the RCT bulk rate review (BRR). The BRR assesses the current compliance position of each subcontractor to determine their RCT deduction rate. This is the first time since September 2019 that Revenue has conducted such a review of the RCT rate applied to subcontractors.
What is the RCT bulk rate review?
RCT withholding rates for subcontractors are 0%, 20% and 35%. The rate of RCT is dependent on the tax compliance position of the subcontractor.
As part of the RCT BRR, Revenue reviews the overall tax compliance position of subcontractors. If Revenue has reason to believe that a subcontractor is not fully tax compliant (outstanding tax returns or payments of tax liability under any tax head, for example), the subcontractor’s RCT rate can be increased accordingly.
As such, subcontractors who are not fully tax compliant may suffer a higher rate of RCT withholding tax on payments received from principal contractors under relevant contracts.
Initial analysis suggests that Revenue believes almost 17,000 subcontractors could see their RCT rate increase as part of this bulk review.
If you are a subcontractor, how will you know if you have been selected for review?
Revenue will post a notification letter to you. The letter will confirm that your RCT rate is due for review and will be increased unless action is taken before the planned April 2022 RCT BRR (the actual date is yet to be confirmed).
If you are contacted, what do you need to do?
The letter issued by Revenue will include the reason for your rate review. You must address the issues raised by Revenue before the planned rate review.
If you ignore the letter, or the required actions are not taken, Revenue will increase your RCT rate. This will result in a higher rate of RCT withholding tax on payments received from principals, and possible cash flow implications for your business.
How can we help?
Our team of RCT experts has the extensive knowledge and experience necessary to assist clients in all sectors on RCT-related issues.
If you have received a notification letter from Revenue in relation to the upcoming RCT BRR and would like to discuss it further, or if you would like to apply to Revenue for a 0% RCT rate, please contact the RCT team members below or your usual PwC contact.
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