RCT help

darrenking

Hi just looking for advice about how RCT works properly. 3 of us have joined together for a bricklaying gang, we employ 3 other bricklayers and 2 labourers. The main contractor deducts 20% RCT from the total earned as a whole gang and then we pay wages out of the remaining cash and also have to pay another 20% for their wages. Is this the correct way to do things or are we paying tax twice?

EasyAccounts1

RCT basically works as follows:

Subcontractors invoice the principal contractor for their work excluding VAT.
So for example you invoice the principal contractor for 10,000.

Depending on your tax status with Revenue they will apply a % to your income for the principal to deduct.
In your case it is 20%,
This would mean that your principal will deduct 20% and pay this to revenue on your behalf. (2,000)
They would then pay you the 8,000.

You will have to pay your employees, daily costs etc out of this.
When you do your income tax return at the end of the year. whatever liability you have will be reduced by the RCT already paid to Revenue. ie. the 2,000.
If you have no tax bill Revenue will refund you the 2,000 once all your tax returns are up to date.

You should consider the 20% deducted by the principal contractor as a down payment for taxes to revenue.

darrenking

Thanks for that explanation really appreciate it. Just say out of the €8000 left over after I've been deducted I have 5 lads to pay, do I also need to pay 20% RCT on their wages too meaning 40% has really gone to tax?

K.Flyer

darrenking wrote: »

Thanks for that explanation really appreciate it. Just say out of the €8000 left over after I've been deducted I have 5 lads to pay, do I also need to pay 20% RCT on their wages too meaning 40% has really gone to tax?

If the 5 lads you have working for you are subbies to you then you need to register as a principle contractor and revenue will advise on what RCT percentage that will apply.
If you are directly employing them, then you need to register as an employer and your accountant will work out how much you need to deduct for paye prsi pension etc etc.

relax carry on

darrenking wrote: »

Hi just looking for advice about how RCT works properly. 3 of us have joined together for a bricklaying gang, we employ 3 other bricklayers and 2 labourers. The main contractor deducts 20% RCT from the total earned as a whole gang and then we pay wages out of the remaining cash and also have to pay another 20% for their wages. Is this the correct way to do things or are we paying tax twice?

3 of you joining together equals a partnership for tax purposes which should be registered with Revenue for RCT, PAYE/PRSI and/or VAT. The principal is deducting 20% from your contracted payment because he's been informed by Revenue to do so. You can get the rate down to zero by engaging with Revenue to find out why you are at the 20% rate. You also have 5 employees or subcontractors depending on the nature and terms of their contracts. Depending on what they are you need to operate RCT or PAYE for them.
If you haven't already done so, engage an accountant and start reading up on your rights and responsibilities.

http://www.revenue.ie/en/tax/rct/subcontractor.html

http://www.revenue.ie/en/tax/rct/principal-contractors.html

darrenking

Thanks for the great advice I really appreciate it. Think it's time to find a good accountant.

beaver111

how much does it cost to get accountantto do rtc returns

EasyAccounts1

beaver111 wrote: »

how much does it cost to get accountantto do rtc returns

For just doing rct it should be relatively cheap. It would probably depend on how many rct would need to be filed.
I assume you are the principal so it would depend on how many sub contractors you have working for you and how often they get paid. It is a really simple system as revenue tells you how much to deduct from the subcontractors.
The main draw back is that it must be done live so when you make a payment you notify revenue.