Subcontractor on RCT contract advice.

Philip82

Hi all,
I have been just offered a few weeks work as a self employed person on an Rct contract basis. Im having trouble understanding exactly what this means. The guy on the phone says I get paid my contract wage each week and I either get deducted 20% or 0% tax. He was then saying I would need to fix up my own tax affairs at the end of the year. This is in the construction sector and I need advice from anybody thats in the same boat or knows exactly how this works. Im supposed to start tomorow and I just feel a little nervous about entering into something short term that Im not familiar with.
Im currently unemployed and Im desperate to make this work out at all costs and hopefully keep it going. Any advice or things I need to do would be hugely appreciated.
Thanks in advance.

Mrs OBumble

I'd contact Revenue for advice.

I don't know much about these, but have a vague feeling that it's somehow related to holding a C2 card, which is not something that can be done in one day.

Maybe you could sub to him via one of the recruitment agencies that work in construction, ie you're an employee of theirs?

Peppa

You are now entering the area of becoming self-employed and need to understand the basic tax rules. No 1 being that you are now liable for your own taxes. This sounds far more difficult than it is and you just need to be organised and not forget that you owe it. The advice I usually would have given most of my clients was open a separate account for tax and pay in each month but with the cost of bank charges now a days it is not feasible for most people so you need to be organised - you have tax credits but social welfare is taxable so these will be reduced if have been in receipt of SW.

Basically RCT is like a the revenue taking 20% of your taxes now. That is 20% of your invoice/payment is withheld by main contractor and paid to the Revenue on your behalf and at the end of year when you assess your taxes the RCT paid to date will be credited against your tax liability or refunded if no liability arises. All paperwork is done by the main contractor and not you.

I would advise registering for ROS on-line asap.

Each year you are self employed you need to submit your tax return (F11) along with the balance of taxes owed and preliminary for next year (this can be gone into in more detail later). You will need to register as self employed with Revenue and ROS on-line. ROS is great as you can file everything on-line and they remind you (via emails) of what is due and when. A form 11 on ROS will pre-fill in any social welfare payments or any PAYE income (if any and of your spouse if married and jointly assessed) and you then enter in your additional income earned as self employed. I am not sure if the F11 prefill in your RCT credits now as I am not in practice anymore but I do still do my husbands accounts, F11 etc.

The Revenue will determine your RCT rate - generally 20% for new registrations.

As you stated only a few weeks work in your post you probably don't need to worry about VAT this year but you may need to bear it in mind for next year if things pick up for you. You won't need to account for the VAT but you will need to register if you surpass the limits - E37,500 is limit - and let the main contractor know if circumstances change.

I know all this probably sounds difficult but it would be far better in the long term if you got your head around it now by reading the Revenue site/Citizens Advice site and asking any questions here. Also the Revenue themselves are usually quite helpful.

I hope this is of some use and makes sense to you - congrats on getting the work, hopefully it will lead to lots more .

Philip82

Hi Peppa thanks for taking the time to reply. I have got an accountant on board for the time been so I can keep everything right until I get the hang of it. I am registered as self employed and I have started work.

Questions: Do I (or am I already) have to register with Ros online??
I think I was told I should be on 0% rate for Rct, Can I appeal it if not or do I have to be on 20%??
You also said I would need to register for vat if I exceed €37500, is that gross income or net income for the year after expenses and tax??

I hope it stays fairly simple and most of all I hope work keeps coming. Thanks for your advice you are a great help.

Peppa

Hi Philip

Glad to be of help.

ROS registration is here: http://www.ros.ie/PublisherServlet/info/setupnewcust

Yes you can appeal the 20% rate if you can prove your taxes are up-to-date. I would advise you tho' to get your accountant to roughly work out your income for the entire year to ensure that you can put some aside for taxes at the year end. Too many times I have seen people get the money in and not set aside a portion for tax and then when it comes to paying it they don't have it. Make sure your accountant is going to do your year end tax returns also or that you are aware if he is not.

VAT registration is based on turnover i.e. income before any offsets - good link here for self-employed:

http://www.citizensinformation.ie/en/employment/types_of_employment/self_employment/self_employment_as_an_individual.html#l4b78a

Don't hesitate to ask if you have any more questions.

Philip82

Thanks Pippa.
Yes I understand what your saying about the rate I presume so that 0% should be applied as its my first time been self employed and my previous tax affairs through previous employers have always ended up with me receiving credit at the end of each year.
Good idea about working out your income and estimating your tax returns for end of year. If my contract gets extended or I get a new one I will surely be doing this. My accountant will be working out my end of year tax for me along with filing all my invoices receipts and others throughout the year. Some people might be able to do this on their own but for now, proffessional advice is well worth the few pounds and come the end of the year you might even save money.Great feeling to be back working so please God it will keep coming, I have been looking for it for long enough!!!