Revenue Focusing On Construction Sector – Current Issues

Revenue Focusing On Construction Sector – Current Issues

Revenue has increased its focus on compliance risks in the Construction Sector. One particular issue is the proper operation of the VAT Reverse Charge. To date revenue has found that the VAT Reverse Charge is not being applied properly.

VAT Reverse Charge for construction operations

Some of the issues include:

  • Failure on the part of the Principal contractor to self-account for the VAT.
  • Incorrect completion of the VAT invoice/document by the Sub-contractor.
  • Application of the two thirds rule where the VAT Reverse Charge applies.
  • Completing the VAT 3 incorrectly (ignoring the reverse charge altogether).
  • Failure to apply the VAT Reverse Charge where there is a construction supply between connected parties.

Rules for VAT in the construction sector

Country Money

Payment of country money without deduction of PAYE/PRSI/USC is subject to strict criteria (PDF, 77KB). Employers should ensure that all payments of country money satisfy the relevant criteria or they may be subject to penalties.

Operation of Relevant Contracts Tax (RCT)

With the introduction of the eRCT system Revenue now has access to real time data on activity in the sector. Particular issues arise where contracts are not notified to Revenue and/or where payments are either not notified or are notified after the actual payment is made. Again, Principal contractors and their agents should ensure that where payments are made under a relevant contract, RCT is operated correctly on those payments.

Self-Review by Taxpayers

As is our normal practice, we strongly encourage self-review by those operating in the construction sector and recommend that Principals/Sub-contractors regularise their affairs before any Revenue compliance intervention begins.

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