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How RCT works
Relevant Contracts Tax is authorised per payment, not set per subcontractor. That one distinction explains almost everything Brickie does differently from an accounts package.
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Are you a principal contractor?
If you engage someone else to carry out construction operations for you, you are a principal contractor for that contract, and RCT applies to what you pay them. It is not about your size. A one-person building company that puts a plasterer on a job is a principal contractor.
RCT covers construction operations specifically: building, demolition, groundwork, installation of systems that become part of the structure, and so on. Buying materials from a builders’ merchant is not a construction operation, which is why suppliers in Brickie have no RCT filing attached to them at all.
Where the boundary is genuinely unclear
Some contracts sit close to the edge — a fit-out that is mostly supply, plant hire that comes with an operator. Brickie does not classify these for you and will not guess. If you are unsure whether a contract is within RCT scope, that is a question for your accountant or Revenue, and getting it wrong in either direction has consequences.
The sequence
Every subcontractor payment follows the same four steps. The order is not a convention — the later steps are impossible without the earlier ones.
- 1
Notify the contract
Before work starts, you tell Revenue about the contract: who the subcontractor is, what the work is, where it is, and what it is worth. Revenue returns a contract ID, a Site Identifier Number (SIN), and an indicative rate.
- 2
Notify the payment
Before each payment, you tell Revenue the gross amount you intend to pay against that contract.
- 3
Revenue authorises a deduction
Revenue replies with a Deduction Authorisation: the rate for this specific payment, the amount to withhold, and the net to pay. This is the only rate that has any authority.
- 4
Pay the net and pass on the details
You pay the subcontractor the authorised net, and the deduction is credited to them against their own tax. The withheld amount is remitted to Revenue.
The three rates
Revenue assigns a rate based on the subcontractor’s own compliance record — their filing and payment history, not yours and not the job.
| Rate | What it means |
|---|---|
0% | The subcontractor's tax affairs are in order. Nothing is withheld; you pay the full amount. |
20% | Substantially compliant. The standard rate for a registered subcontractor without a clean record. |
35% | Not known to Revenue, not registered, or with outstanding compliance issues. |
You do not choose, negotiate or apply these. Revenue sets the rate and can change it mid-contract through its Bulk Rate Review, without telling you.
Why a stored rate is wrong
The intuitive design — record that O’Briain Plastering is at 20%, apply 20% to their invoices — is the mistake this whole product is shaped around avoiding. Three things break it:
- The indicative rate is not the rate. The rate returned when you notify a contract is a hint about the subcontractor’s current standing. It is not authority to deduct anything, and Revenue lists relying on it among the common errors.
- Rates change without notice. A subcontractor who was at 0% in March can be at 20% in April. A rate you stored goes stale silently — nothing tells you it has moved.
- Paying without an authorisation has a fixed price. If you pay without first obtaining a Deduction Authorisation, you are liable for 35% of the payment regardless of what the subcontractor’s actual rate was.
This is the expensive one
Pay a subcontractor €10,000 without a Deduction Authorisation and you can be liable for €3,500, even if that subcontractor was sitting at 0% and nothing was due to be withheld. The liability attaches to the missing authorisation, not to the tax.
So Brickie holds no rate anywhere. It records the authorisation Revenue returned for a specific payment, checks the arithmetic against it, and blocks the payment where no authorisation exists. If that feels like it is getting in your way, it is doing the one job it was built for.
A worked payment
A subcontractor invoices €4,250 for plastering. The contract is already notified. You notify the payment, and Revenue authorises at 35%.
The subcontractor receives €2,762.50. The €1,487.50 goes to Revenue and is credited to the subcontractor against their own tax bill — it is withheld, not lost, and they reclaim it. Your cost is the full €4,250 either way, which is why cost reporting uses the gross and not the net.
When Revenue does not know them
A 35% authorisation on a subcontractor you expected to be lower usually means Revenue could not identify them. If the contract was notified without a tax reference number, there is nobody to look up, and 35% is the correct answer to the question that was actually asked.
The fix is on the subcontractor’s side: they need to be registered for RCT and give you their tax reference number, which should be on their invoice. Once the contract carries a reference Revenue can match, subsequent payment notifications get their real rate.
It is worth telling them
A subcontractor being paid at 35% because their reference was missing is usually unaware of it. They get the money back eventually, but they are financing your job in the meantime, and they will generally fix it quickly once they know.
VAT works backwards too
Construction services within RCT scope are subject to the VAT reverse charge. The subcontractor charges no VAT on the invoice. You account for it yourself, normally at 13.5%, and reclaim it in the same return.
So a subcontractor invoice showing VAT is a signal something is off — either the work is outside RCT scope, or the invoice is wrong. Brickie flags it rather than silently accepting it. See Recording invoices.