C45 tax

C45 is a tax for subcontractors.

Relevant Contracts tax ( Or C45 tax as it is more commonly known) accounts for a large number of construction workers in Ireland. It is the system by which construction companies hire and effectively employ other contractors, be they Carpenters, Plasterers, electricians, etc., pretty much all walks of life in the Construction Industry.

What happens is that rather than the main principal contractor hiring the workers as employees and taxing them as any normal employee via the PAYE system, the principal just pays the subcontractor for the work that they have done, and they then deduct 35% at source from the Gross payment. So, for example, say if a carpenter has worked on a Job for a principal and bills him €1,000, the principal pays the subbie €650, and pays €350 across to the Revenue on behalf of the subcontractor. This allows a sub-contractor to go about their business in the normal manner but without the concern (by Revenue) that in that process taxes will not be paid in full.

The principal must also issue an RCTDC cert ( that’s the orange part of the C45 form) to the sub-contractor, and this will show important information such as the name and PPS number of the both parties involved, as well as the gross payment of €1,000, the net payment of €650, and the tax deducted of €350, i.e 35% of the gross payment. The sub-contractor is now effectively self-employed, and can apply to have all or most of the €350 tax deducted refunded to him or it can be used towards payment of some of his tax liabilities, such as income tax or VAT. This happens because C45’s are a gross tax rather than one that takes various expenses into consideration before determining the tax liability.

They must also submit an income tax return each year because they are self-employed. The main purpose behind this system is to ensure that any subcontractors employed by principals do comply with the law and account for all of their income that they receive, traditionally the construction industry was/is rife with under the counter cash payments, this is one way of regulating the industry.

Working on a C45 basis can all be very easily accounted for and controlled as long as you appoint a good accountant who can take care of your affairs. Of course, C45 tax does not just apply to construction, it also applies to the Forestry and Meat Processing industries. Here at Advisors.ie we can advise you on this and all areas of your business, our firm is based in Dublin city centre and we’d love to hear from you on 01 6790990

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