There has been significant changes made to the Relevant Contracts Tax scheme. The new measures were announced on Budget day 7th December 2010.
The Finance Act 2011 provides the legislative back up. What are these changes?
Three rate withholding scheme:
- zero rate will be applicable to C2 holders on the same basis as before but the criteria includes compliance with tax obligations for previous three years
- 20% will apply to subcontractors registered for tax with a record of substantial compliance
- 35% rate which will be a default rate where both zero and 20% are not appropriate
Monthly returns will be replaced with an annual return and offset system.
- It will be mandatory that all returns will be submitted electronically
- Principal contractor must contact the Revenue with subcontractor’s details including confirmation that the subcontractor is not an employee.
- Revenue will advise the principal contractor which rate of withholding tax applies.
- Revenue will credit tax deducted onto the subcontractors tax record
Revenue is still working on the finer details of the scheme but it is a major change from the old system.