The Revenue Commissioners informed the Department of Education that with effect from 1 January 2012 schools will have to operate Value Added Tax (“VAT”) and Relevant Contracts Tax (“RCT”) on construction works.  The purpose of a Joint Managerial Body “JMB” seminar held on the 21 June 2012 with speakers from Revenue was to clarify the types of transactions covered by the new requirements for VAT and RCT.

At this seminar the speaker from the Revenue Commissioners confirmed that all schools funded by the Department of Education (Oireachtas) must now register for VAT and RCT. They also stated that there would not be any dilution in the operation of RCT for schools and emphasised that all repairs must be included within the RCT payment system. Whilst many present at the conference felt that these requirements are extremely onerous in relation to small repairs, the Revenue Commissioner’s speaker emphasised that these works fell within the operation of these taxes.  The only concession offered by the Revenue Commissioners was to state that although this scheme should have been operational from 1 January 2012, that they would look sympathetically at any interest or penalties arising for the year to date.

If any school fails to deduct RCT, they are still liable to pay RCT to the Revenue Commissioners together with interest and penalties.  As the RCT can be 35% of the amount due to the Contractor, failure to deduct any RCT could be very costly.  

The Revenue Commissioners did give a commitment that they would give further clarification on the types of transactions that fall within the RCT regime and they issued further guidance notes which can be accessed here.

The position at the moment is that Schools are required to register for VAT in relation to Relevant Contracts. Schools will no longer pay VAT to the contractor on their invoices but instead, this VAT will be paid directly to Revenue.

It is a requirement that all VAT and RCT Returns are now filed on-line and it is important that you register as soon as possible as it can take up to six weeks for VAT registration to be completed.

We realise that this is a further additional administration burden for the school, but at the moment it is an important obligation that must be complied with.  If you require any assistance in with any aspect of this matter, please do not hesitate to contact us.