Reform of RCT (Relevant Contracts Tax) Budget 2011

Reform of RCT (Relevant Contracts Tax) Budget 2011

Reform of RCT (Relevant Contracts Tax) Budget 2011 150 150 Ralph Smith

The following changes are contained in Budget 2011

? Replacement of the current RCT rate of 35% with a tworate withholding system on a revenue neutral basis:
o 20% rate for subcontractors registered for tax with an established compliance record;
o 35% rate for subcontractors not registered for tax;

C2 ?registered subcontractors who, as before, are eligible to receive?payments without deduction of RCT;

? Abolition of the monthly repayment system and replacement with an offset system;

? Strengthening of the reporting system for RCT Principals?in order to enhance compliance and reduce the?opportunities for fraud.

More complete details are expected in the Finance Bill which will clarify the?criteria for the application of the 20% and 35 % rates. It should also contain?more details on proposals to replace the current system of periodic repayments?of RCT with a system of offsetting RCT against tax liabilities.

It should be noted that RCT may impact on many industry sectors, including the?public sector and telecommunications industry. It is not always limited to the

traditional RCT industries of meat processing, construction and forestry

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