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RCT Query

  • 16-03-2012 7:52pm
    #1
    Registered Users, Registered Users 2 Posts: 124 ✭✭


    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.


Comments

  • Registered Users, Registered Users 2 Posts: 474 ✭✭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.


  • Registered Users, Registered Users 2 Posts: 4,864 ✭✭✭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)


  • Registered Users, Registered Users 2 Posts: 200 ✭✭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:


  • Registered Users, Registered Users 2 Posts: 4,686 ✭✭✭barneystinson


    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...


  • Registered Users, Registered Users 2 Posts: 4,864 ✭✭✭Infoanon


    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


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  • Registered Users, Registered Users 2 Posts: 4,864 ✭✭✭Infoanon


    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'


  • Registered Users, Registered Users 2 Posts: 4,686 ✭✭✭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.


  • Registered Users, Registered Users 2 Posts: 4,864 ✭✭✭Infoanon


    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.


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