Many a time I have been asked to explain the difference between RCT and an Employee, writes Nuala McGowan,

Relevant Contract Tax
Relevant Contract Tax (RCT) is applicable in the construction, fishery and meat sectors only.  The Subcontractor works for a main contractor. A school is also a main contractor. It indicates that the person is self – employed, either as a main contractor or a sub contractorRCT is deducted from the gross payments given to the subcontractor, which is paid over to Revenue for the subcontractor, when a Principal contractor employs a subcontractor.

The payment of tax (RCT) is like a deposit account for the subcontractor. As this payment can be allocated to any tax
head to discharge the subcontractor taxes or reduce the liability of taxes due by subcontractor.

Rates of tax for relevant contracts tax are 0, 20 and 35. It is withholding tax. At the commencement of the project the main contractor needs to notify revenue, the details of the
job, location, cost and length of duration of the job. Before any payment is made to the subcontractor, the main contractor needs to check the rate of tax applicable and advise revenue of
the date of payment, and the gross amount to be paid. A subcontractor under relevant contracts tax is allowed to work for a number of contractors

Employee

An employee works for the employer only, and is entitled to holiday pay, bank holiday pay A contract of employment needs to be given to the employee shortly after the employment
commences. It is important that a list of employees is kept, showing name and address of employees, commencement date of employment, and the amount of wages paid to
each employee. This information will be kept on the payroll package and will be very easy obtained.

It is very important that Contract of Employments are given to employees 5 days after commencement. Payslips require to be given to employees each time they receive a
payment, showing gross pay, tax, USC and PRSI due.

The main difference between relevant contracts tax and an employee is that 1 is contract of employment employment and relevant contracts tax is contract for employment

For any further questions in relation to RCT and employment please contact McGowan Accountancy Services (086) 0352849 or (090)