RCT and VAT Reverse Charge in Ireland: A Plain Guide for Subcontractors

If you work as a subcontractor in Irish construction, two rules keep turning up on your invoices: RCT and the VAT reverse charge. They are separate, and mixing them up is easy. This is a plain guide, not tax advice. Your accountant and Revenue's guidance are the last word.

The Two Rules

• RCT (Relevant Contracts Tax) is a system where a principal contractor deducts tax from payments to a subcontractor and pays it to Revenue. Your deduction rate depends on your Revenue status.
• The VAT reverse charge means that on certain construction supplies to a principal contractor, you do not charge VAT. The principal contractor accounts for it instead.

What Goes on the Invoice

For a reverse charge supply, the lines are shown at 0% VAT and the invoice carries this wording: VAT ON THIS SUPPLY TO BE ACCOUNTED FOR BY THE PRINCIPAL CONTRACTOR. Your VAT number as the subcontractor should also appear, and a VAT rate or amount line should not be shown.

What Goes Wrong

• Charging VAT on an invoice where the reverse charge applies
• Missing the exact wording
• Recording a payment as if it were the full invoice amount, when part was withheld under RCT

Making It Automatic

The safest fix is to set it once per client. Mark a client as a contractor, and every invoice to them defaults to 0% VAT with the wording in place. Record the RCT deduction as a payment type, so an invoice paid in part and withheld in part still shows as fully settled. Tradon does exactly this. See our builders and carpenters page or the roofer page, or get in touch. We are based in Saggart, Dublin 24.