Relevant Contracts Tax: pay nothing before Revenue has been told

RCT differs from every other withholding system in one respect, and it is the respect that catches people: you are not allowed to work out the deduction yourself. Revenue works it out, payment by payment, and tells you. Paying a subcontractor before that answer arrives is a breach in itself, whatever amount you withheld.

Revenue's own Tax and Duty Manual sets out the sequence, and everything else in RCT follows from it.

What RCT is, and who it reaches

Revenue describes RCT as "a tax deduction at source system that applies to payments made under relevant contracts", covering "the carrying out of relevant operations in the construction, meat processing and forestry industries". All interaction runs through the Revenue Online Service (ROS).

Two conditions have to hold at once. There must be a relevant contract, and the person paying must be a principal to whom RCT applies, as set out in section 530A of the Taxes Consolidation Act 1997.

The manual gives the example that resolves most confusion:

if a private householder engages a builder to build an extension this is technically a relevant contract. The builder is working as a contractor for the householder and carrying out a relevant operation in the construction industry. However, because the householder is not a principal to whom RCT applies … RCT does not apply to any payments made to the builder. However, where that builder in turn engages subcontractors to carry out some of the work, the builder would be obliged to operate RCT on payments to those subcontractors.

So a domestic job is outside RCT at the top of the chain and inside it one level down. Revenue's public guidance puts the test for a principal in a single sentence: "You are a principal contractor if you use a subcontractor to carry out activities on behalf of your business."

What counts as a construction operation

Relevant operations are defined in section 530 of the Taxes Consolidation Act 1997. For construction, the first limb covers "the construction, alteration, repair, extension, demolition or dismantling of buildings or structures".

The manual then draws lines that matter to small firms:

• Structures includes gates, traffic lights, road signs, parking meters and garden sheds, and repairing them.
• Repair includes replacing constituent parts — repairing a window by fitting a new pane, repairing a tiled floor by replacing broken tiles.
• Alteration must be material. In the manual's words, painting walls, replacing doors, windows or kitchen presses are within the definition, but "minor changes such as painting one wall or replacing one door in a building would not be considered sufficient".
• Maintenance-only contracts are outside. "It does not include routine maintenance contracts. Contracts for repair work or for repair and maintenance would be included but not contracts for maintenance only."

That last distinction is worth reading twice, because it is the one that decides whether a service agreement is in or out. Repair and maintenance: in. Maintenance alone: out.

The four steps

1. Contract notification. Before any payment can be notified, the principal must submit details of each individual relevant contract to Revenue. And before doing so, "the principal contractor must be satisfied as to the identity of the subcontractor". Identity verification is a duty, not a courtesy.

2. Payment notification. "The principal contractor must notify Revenue of all relevant payments before they are made." The figure notified is the gross payment, and — this is the join with VAT — the "VAT exclusive amount if the VAT reverse charge applies". Where the payment itself is governed by a payment claim under the Construction Contracts Act 2013, the claim's own due date is not the date you may pay — see The payment claim notice: five days that decide if you get paid.

3. Deduction authorisation. Revenue responds with an authorisation setting out the rate and the amount to withhold. Revenue's subcontractor guidance describes what it shows: the gross payment, the net payment, the RCT deduction rate and the amount of RCT to be deducted. Where tax is deducted, the principal must give the subcontractor a copy or the details.

4. Deduction summary. At the end of the return period Revenue makes a deduction summary available, listing every payment notified. The principal checks it, amends or adds where necessary, and if nothing is done it is "deemed to be the return on the return filing date".

That deeming provision cuts both ways. Do nothing and an accurate summary becomes your return automatically. Do nothing and an inaccurate summary becomes your return automatically as well.

The three rates

The rate belongs to the subcontractor, not to the contract, and the principal does not choose it. If you are a subcontractor sitting at 35 per cent, the route back down is compliance history, not negotiation with the contractor.

Paying Revenue

The manual gives two dates:

the due date which is the 23rd of the month following the end of the return period (monthly or quarterly), if paying electronically and the 14th of the month following the end of the return period if paying by other means.

Since RCT runs through ROS in any case, the 23rd is the date that matters in practice.

The penalty, and why it is per payment

If a principal makes a payment to a subcontractor without a deduction authorisation, a penalty applies to each unreported payment, and its size depends on the subcontractor's rate:

Look at the shape of that table. The penalty is not the tax you failed to deduct — a 0 per cent subcontractor generates no tax at all, and paying them unnotified still costs 3 per cent. The penalty is for breaking the notification sequence, and it is charged for every payment you broke it on.

Twelve unnotified weekly payments of 2,500 euro to a 20 per cent subcontractor is twelve penalties of 250 euro, not one.

Where RCT and VAT meet

If you operate RCT on a payment, the VAT reverse charge applies to the same supply: the subcontractor invoices without VAT and the principal accounts for it. Three consequences follow, and all three appear in the RCT manual and Revenue's VAT guidance:

• The amount you notify to Revenue for RCT is the VAT-exclusive figure.
• RCT is calculated on that VAT-exclusive amount.
• Being a principal contractor obliges you to register for VAT irrespective of turnover.

The two systems are separate but they are wired together, and a firm that gets RCT right and the VAT treatment wrong has still issued an invalid invoice. What the resulting document looks like line by line — and why it cannot state the amount you will actually be paid — is in RCT invoice: the document that shows neither the VAT nor what you will be paid.

A short checklist

1. Notify the contract before the first payment, not before the final one. No contract notification, no valid payment notification.
2. Never pay before the deduction authorisation lands. It is the single most expensive shortcut in the system.
3. Check the deduction summary every period. Silence is treated as agreement.
4. Give the subcontractor the authorisation details whenever tax is deducted. Without it they cannot evidence the credit.
5. If you are the subcontractor, watch your own rate. Zero and 35 per cent on the same 60,000 euro of work is a 21,000 euro difference in what reaches your account this year.

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Position as at 29 August 2026. This article describes the law and is not tax advice. RCT is governed by Chapter 2 of Part 18 of the Taxes Consolidation Act 1997; Revenue's Tax and Duty Manuals are guidance and are updated regularly, and the sources below carry the date on which they were checked.

What Zirko does here: nothing inside RCT. Contract notifications, payment notifications and deduction authorisations happen in ROS, and Zirko does not connect to it. What it does hold is the job and the subcontractor invoices behind each payment, so the figure you notify has a document under it rather than a note on a phone.