RCT and VAT
Revenue regulations aimed at increasing tax compliance which impact on boards of management (BOMs) were put in place in 2012. Relevant Contracts Tax (RCT) is a tax regime applicable to construction contracts in which tax is deducted by a principal contractor from payments due to a contractor for construction operations. BOMs are now responsible for complying with RCT requirements and VAT returns when making payments to their contractors.
It is the view of the INTO that, as this is a financial matter, it is the responsibility of the treasurer of the BOM in consultation with the chairperson. The Governance Manual for Primary Schools 2015-2019 states that neither the principal nor the teacher nominee to the board shall be the treasurer. Neither shall they be eligible for appointment as chairperson. Therefore, responsibility for this issue does not lie with the principal or the teacher nominee on the board. It is the view of the INTO that principal teachers should not undertake this work and that, if professional assistance is required to comply with the regulations, the BOM should engage a competent person to provide such advice.
Tax Regime applicable to School Management Authorities when engaged in school building projects
In May 2012 the DES announced that new requirements have been introduced by the Revenue Commissioners in relation to the operation of Relevant Contracts Tax (RCT). RCT is a tax regime applicable to construction contracts in which tax is deducted by a principal contractor from payments due to a contractor for construction operations. RCT usually applies to main contractors in their dealings with sub-contractors. The Revenue Commissioners have decided that, with effect from 1 January 2012, School Boards of Management are regarded as ‘Principal Contractor’. This means that the Board of Management undertaking works funded by the DES are responsible for complying with RCT requirements and VAT returns when making payments to their contractor. The Revenue Commissioners have introduced a mandatory electronic RCT system for all principal contractors in the RCT system, so all filings and notifications must be done online through the Revenue Online System (ROS). Full details of these new requirements are available on www.revenue.ie or from your local Revenue Office.
To comply with this new tax regime Boards of Management must carry out each of the following tasks in respect of each construction contract commenced at their school:
- Register online for the Revenue Online Service (ROS).
- Register with Revenue as a Principal Contractor and for Value Added Tax (VAT).
- Obtain contractor’s tax reference number and proof of identity.
- Prior to commencement of construction, notify the Revenue of the contract (Contract Notification).
- Prior to discharging any payment to the contractor, notify the Revenue of the payment (Payment Notification).
- Obtain a Deduction Authorisation from the Revenue specifying the tax to be deducted from the contractor.
- Provide the contractor with a copy of the deduction Authorisation.
- Deduct the applicable amount of tax from payments due to the contractor .
- File RCT returns and pay the deducted amount to the Revenue.
- File monthly VAT returns and pay the VAT to the Revenue.
- Obtain and keep a Deduction Summary – Periodic Return at the end of each return period.
If your Board of Management requires more information or are unsure of their obligations under this new tax regime they should contact their local Tax Office for advice and guidance.
CPSMA have posted FAQs on the CPSMA website (Guidance Notes section).