RCT Query

retenzo12

I recently set up as a sole trader in the construction industry. I have been advised by the District Inspector "Your rate of RCT as a subcontractor has been determined to me to be 20%".

Does this mean if I do a job for €3,000 for supply of materials and labour and invoice it as "VAT to be accounted for by main contractor" i.e. 0% VAT I will only receive a payment of €2,400?

Is this a standard letter they send out? I only set up at the start of the month but wont be able to afford deductions of 20% on my payments.

I understand I am liable for tax on my earnings however.

Can anyone offer their advice.

J.Ryan

Yes 20% of you invoice will be deducted and paid to the Revenue Commissioners.

In your example, this €600.00 could then be used to pay taxes.

This deduction will only apply where you do work on a subcontract basis, if you are doing work as a principle (doing an extension or whatever) then you get the full payment.

Infoanon

Just note that its not 0% vat - its 'reverse charge vat' - most likely 13.5% but possibly 23% - and you will have to make a statement on any invoice you issue to a client.

Also note that the 20% deduction rate is only an indication of the deduction rate that will be applied (0% or 30% being the other rates).

The Principal only knows the actual rate of deduction to apply when the principal makes a payment notification to the revenue.

The tax deducted can be used to offset against other taxes (subject to revenue guidance)

love that turbo

Infoanon wrote: »

Just note that its not 0% vat - its 'reverse charge vat' - most likely 13.5% but possibly 23% - and you will have to make a statement on any invoice you issue to a client.

Doesnt Reverse charge vat only apply to supply & install ie 13.5% vat. If vat is 23% this is supply only and is not covered under RCT thus no tax is held bu the MC.:cool:

barneystinson

love that turbo wrote: »

Doesnt Reverse charge vat only apply to supply & install ie 13.5% vat. If vat is 23% this is supply only and is not covered under RCT thus no tax is held bu the MC.:cool:

Not as simple as that - 2/3 rule for starters...

Infoanon

barneystinson wrote: »

Not as simple as that - 2/3 rule for starters...

Open to correction but the 2/3 rule does not apply where there is reverse charge - if you have a mix of supply and labour there should be separate invoices

Infoanon

love that turbo wrote: »

Infoanon wrote: »

Just note that its not 0% vat - its 'reverse charge vat' - most likely 13.5% but possibly 23% - and you will have to make a statement on any invoice you issue to a client.

Doesnt Reverse charge vat only apply to supply & install ie 13.5% vat. If vat is 23% this is supply only and is not covered under RCT thus no tax is held bu the MC.:cool:

No - RCT can be at 23% reverse charge - list of Subcontract at 23% under reverse charge can be found on revenue website under 'reverse charge faq's'

barneystinson

Infoanon wrote: »

Open to correction but the 2/3 rule does not apply where there is reverse charge - if you have a mix of supply and labour there should be separate invoices

Sorry, you are correct, or half correct! You don't need to invoice separately if there's labour & materials (that'd double the amount of invoices issued in most cases), it's simply that the 2/3 rule doesn't apply, so the principal should apply the rate that would apply to the labour.

Infoanon

barneystinson wrote: »

Sorry, you are correct, or half correct! You don't need to invoice separately if there's labour & materials (that'd double the amount of invoices issued in most cases), it's simply that the 2/3 rule doesn't apply, so the principal should apply the rate that would apply to the labour.

Sorry,I should have been clearer - if you have a mix of RCT & non-RCT then two separate invoices are required.