RCT & VAT for Schools
1. Confusing the deduction rate for RCT with the VAT. This is not the case. VAT is a seperate charge to RCT and in most cases VAT will be at 13.5% on relevant payments. If you are unsure why not email us.
2. Paying VAT to the Contractor. Where the payment is a relevant payment for RCT, the VAT reverse charge applies. The contractor's invoice should not show any VAT; it should instead state that "VAT on this invoice is to be accounted for by the Principal Contractor". The school then calculates the amount of VAT itself (normally 13.5%) and pays that amount directly to Revenue every two months.
3. Adopting a blanket deduction rate for RCT. The RCT deduction rate varies for each contractor and may vary from payment to payment. You must notify Revenue prior to making each payment and apply the deduction rate given by them to that payment.
4. Applying VAT to payments to professionals. Payments to professionals such as architects and engineers are not relevant payments for the purposes of RCT or the VAT reverse charge.
5. Not including repair items for RCT or VAT reverse charge. Any repair to a structure or system requiring the fitting of a part is a relevant operation and RCT and VAT should be operated on it.
6. Entering the VAT reverse charge in the T2 box (VAT on Purchases) in the VAT 3 form. The VAT reverse charge should be entered in Box T1 (VAT on Sales). In effect the school is acting in place of the contractor for the purposes of making the return and, if the contractor was filling in the form, they would place the amount in Box T1.
7. Omitting to make the VAT 3 returns. VAT returns must be made even where there is no VAT to be accounted for in a particular period.
8. Not being registered: Given the scope of RCT and the VAT reverse charge it is unlikely that any school would not carry out relevant operations in any particular 12 month period. The Board has a duty to protect itself (and its patron) against financial risk.