Relevant Contracts Tax – When does a payment fall within the remit of RCT?

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OSK have recently received queries in relation to whether or not a payment falls within the Relevant Contract Tax (RCT) regime.  See below a summary of the relevant legislative provisions - every payment / contract should be looked at closely, along with the full legislation, before deciding if they fall within the RCT regime.

For a payment to fall within the remit of RCT the following must apply –

1. the person making the payment must be a “principal contractor” as defined in the legislation;
2. the contract between the two persons must be a “relevant contract” as defined;
3. the work to be carried out must be “relevant operations” as defined.

A Principle Contractor is defined in Section 531(1) Taxes Consolidation Act 1997. It is a wide-reaching definition, not exclusively but including the following -  

• a person who has himself been engaged under a relevant contract with a principal;
• a person carrying on a business which includes the erection of buildings or the development of land, or any person connected with a company carrying on such a business.

“Relevant operations” incorporate “construction operations”. “Construction operations” are defined in Section 530(1) Taxes Consolidation Act 1997 as:

   “(a) the construction, alteration, repair, extension, demolition or dismantling of buildings or structures,

   (c) the installation, alteration or repair in any building or structure of systems of heating, lighting, air-conditioning, soundproofing, ventilation, power supply, drainage, sanitation, water supply, or burglar or fire protection,

   (d)  the external cleaning of buildings (other than cleaning of any part of a building in the course of normal maintenance)..”

Based on the definitions above routine maintenance does not fall within RCT. Repairs do fall within RCT.

The Revenue provide information regarding the application of RCT in Part 18 (Section 02-01 to 02-11 inclusive) of the Tax and Duty Manuals, available from the Revenue website.

Please contact Brian Dignam on 01 439 4200 if you have any further queries on RCT or in relation to our Property Management Audit services.

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