Relevant Contracts Tax (RCT) in Ireland: How It Works for Principals

Relevant Contracts Tax (RCT) is the system Revenue uses for payments made to subcontractors in certain sectors. If your business is a principal contractor, you are the one who notifies Revenue, applies any deduction and pays it over. This guide sets out, from Revenue's own pages, how RCT works for principals: who counts as one, what you must do before and after each payment, the three deduction rates, return deadlines and the penalty for unreported payments. Rules in this area change, so treat this as an orientation and check each point on the official page. Professionals should take advice for their own situation.

What RCT is and who is a principal contractor

According to Revenue's page "RCT for principal contractors" (published 19 May 2026), you are a principal contractor if you use a subcontractor for activities in construction, meat processing or forestry. The page also lists other categories, including connected companies, local authorities, public utility societies and housing associations, Government Ministers, certain statutory bodies, and those carrying out gas, water or electricity work, hydraulic power, dock, canal or railway work, or installing, altering or repairing telecommunications systems.

Revenue's Tax and Duty Manual Part 18-02-02 (last updated February 2026) explains the detail. It refers back to section 530A of the Taxes Consolidation Act 1997 and says, for example, that a person who is the contractor under another relevant contract can be a principal, as can a business that includes the erection of buildings or the development of land. The manual also records that a builder or developer is not a principal by reason only of erecting a building for their own use or occupation, or for their employees. It sets out a short-letting exclusion and a Revenue practice for minor repairs on rented property, each with its own conditions. Read the manual before relying on either.

The categories on Revenue's page are defined by the activity carried out or the type of body, so check the list against your own circumstances.

Subcontractor or employee

RCT applies to relevant contracts with subcontractors, and the contract must not be a contract of employment. Revenue's principal contractors page says you must decide whether a worker is a subcontractor or an employee using the five questions from the Supreme Court's Karshan judgment. If you wrongly register an employment contract as a relevant contract, the page says you may have to pay the PAYE, PRSI and USC that should have been deducted, and you may also owe interest or penalties.

Tax and Duty Manual Part 18-02-04 (last reviewed November 2025) refers to the same Karshan framework, to guidance in TDM 05-01-30 and to the revised Code of Practice on Determining Employment Status published in November 2024. The manual also describes the contract notification as including a declaration from the principal that the contract is not a contract of employment.

If your HR team works with agencies or labour providers, note that UK umbrella company rules are a separate matter. Our guide to the UK umbrella company PAYE reforms covers UK rules, which are not Irish law and do not change how RCT operates here.

Registering as a principal and notifying contracts

Revenue says principal contractors must register with Revenue and make all transactions electronically through the Revenue Online Service (ROS). Tax and Duty Manual Part 18-02-04 states that a principal must notify Revenue within 21 days of entering into their first relevant contract as a principal. Changes to registration details must also be reported within 21 days.

The notifications page (published 19 May 2026) says you must notify Revenue immediately after entering into a relevant contract. Before you do, obtain and keep documentary evidence of the subcontractor's identity. The notification includes:

• the subcontractor's Tax Reference Number and name
• the sector, and the nature and location of the work
• start and end dates
• the estimated contract value
• a declaration that the contract is not a contract of employment

You then receive a Site Identifier Number (SIN) for the site or project, which you use on all related contracts. Subcontractors see it on their contract confirmation letter. The manual adds that changes to contract value, duration or location must be notified.

Before each payment: payment notification and deduction authorisation

Before paying a subcontractor, you notify Revenue of the gross payment amount and the payment date. Revenue then sends a deduction authorisation to your ROS inbox stating any tax you must deduct. If tax must be deducted, you must give the authorisation details to the subcontractor.

The manual adds some detail. A payment notification cannot be amended; if details change it must be cancelled and resubmitted. Payments in kind are valued at market value. A deduction authorisation is valid only until the earliest of the payment being made, the due date for the return period, the return being made or the notification being cancelled. If technical difficulties stop you notifying on time, the notifications page allows a post-payment notification.

The manual also says that before submitting a payment notification a principal must obtain a statement from the subcontractor covering the work, its cost, and the subcontractor's name, address and tax reference, and retain it.

The deduction rates

The manual states that rates of tax are currently set at zero, 20% or 35%. Revenue's subcontractor page (published 19 May 2026) links the rate to the subcontractor's tax compliance record: up to date is 0%, substantially up to date is 20%, and a poor record or not being registered with Revenue is 35%. Revenue sets the rate, not the principal, and the rate appears on the deduction authorisation. Check the current figures on the official page before you rely on them.

The subcontractor's rate is determined by Revenue, and the subcontractor can self-review it through ROS once compliance issues are resolved.

Returns and paying the tax over

Revenue creates a deduction summary from your payment notifications, listing payments and the total RCT due. It covers one month for monthly filers or three months for quarterly filers, and is available in ROS after the return period ends. According to the notifications page, if the summary is correct it serves as your return for the period. You may amend it before the 23rd of the month, and deducted tax must be paid to Revenue by the 23rd of the month following the return period.

The manual (section 9) also refers to late payment interest of 0.0274% per day or part of day and a EUR 100 surcharge for late returns. That manual was last reviewed in November 2025, so check the current figures on the official page. The manual words the deadline as the 23rd day after the end of the period, while the Revenue page words it as the 23rd of the month following; confirm the date for your return period in ROS.

Penalties for unreported payments

Revenue's "Penalties for principal contractors" page (published 19 May 2026) says a payment to a subcontractor that is not shown on a deduction authorisation is an unreported payment, and the principal is liable for a penalty on each one. The penalty depends on the subcontractor's status:

If a payment is reported incorrectly, you receive a letter in your ROS inbox stating the penalty, which you can pay through the RCT Penalty Payment option on ROS. If you do not pay, Revenue issues a Notice of Opinion, and a disagreement is referred to a court. The manual also lists civil penalties that may apply to other failures, such as not obtaining and keeping evidence of identity or failing to register.

Records

Tax and Duty Manual Part 18-02-04 says principals must keep records of contract notification information and declarations, relevant payments and tax deducted, registration details, return details for each period, and tax due and payable. Check the manual for the retention requirements that apply.

A practical checklist

Our suggestion: build a short pre-payment routine so that no subcontractor invoice is paid before it has been checked.

• Confirm the contract is notified and the SIN is on file.
• Confirm the worker is a genuine subcontractor, and keep your reasoning with the declaration.
• Submit the payment notification, then pay only what the deduction authorisation allows.
• Pass the authorisation details to the subcontractor.
• Review the deduction summary before the 23rd and pay on time.

Tax compliance status also matters outside RCT. Revenue's RCT pages describe a subcontractor's tax compliance record and do not use the term tax clearance, which is a separate process covered in our guide to tax clearance certificates. For the other side of the process, our guide to RCT for subcontractors covers registration through the principal, rate reviews and how deductions are credited.

Learnsignal's offices are off Baggot Street in Dublin, and we offer in-person training from there. For current details, see our CPD pages.

Frequently asked questions

Do I have to register for RCT if I only occasionally use subcontractors?

Revenue says you are a principal if you use a subcontractor for activities in construction, meat processing or forestry, or fall into another listed category. The manual says to notify Revenue within 21 days of the first relevant contract. Whether your situation qualifies depends on the facts, so check the Revenue pages or take advice.

Who decides the deduction rate?

Revenue does. The rate shows on the deduction authorisation issued after you submit the payment notification.

What happens if I pay a subcontractor without notifying Revenue first?

Revenue treats a payment not shown on a deduction authorisation as an unreported payment, with a penalty based on the subcontractor's status (3%, 10%, 20% or 35% of the payment, as read on Revenue's page). You must also submit an unreported payment notification.

When must the deducted tax be paid?

Revenue's notifications page says by the 23rd of the month following the return period. Check the date for your period in ROS.

Can I treat an employee as a subcontractor to simplify things?

No. RCT applies only where the contract is not a contract of employment. Revenue refers to the Karshan five-question test, and wrongly registering employment as a relevant contract can lead to PAYE, PRSI and USC liabilities plus interest or penalties.

This guide summarises Revenue guidance as read on the dates shown and is not legal or tax advice. Always check the current Revenue pages before you act.