Understanding RCT on mixed contracts: what the latest Revenue guidance means for you

The Irish Revenue has provided additional guidance in its Tax and Duty Manual on Relevant Contracts Tax: Relevant Operations on the application of RCT on mixed contracts, including the need to apportion consideration between construction and non‑construction elements. 

What has changed in the Revenue guidance? 

Previously, the guidance only provided that where there are contracts involving both the sale of land and construction services, only the construction element of the contract was subject to RCT.

The updated guidance now confirms and extends this principle to other common mixed contracts, such as:

• Design-and-build contracts, and
• Contracts to supply and install systems in a building or structure.

The key clarification is that not everything in these contracts is subject to RCT. Revenue now makes this distinction explicit, helping reduce uncertainty for contractors and principals. 

Revenue now provides clearer examples that reflect how these contracts operate in practice:

• In a design-and-build contract, the design work is not a construction operation for RCT purposes, but the build work is.
• In a supply-and-install contract, the supply of materials is not subject to RCT, but the installation work is. 

Pricing and apportionment for RCT purposes 

Where a contract clearly separates the price for each element of the overall supply, RCT applies only to construction operations. Where there is only one single price in the contract, the principal contractor must apportion the price on a reasonable basis and apply RCT only to the part relating to construction operations. The principal contractor must also self-account for VAT under the reverse charge mechanism. In doing so, this should include a careful review of the underlying contract. 

Practical implications for your business 

While this update does not bring new activities to RCT, it acts as a useful reminder for those operating in the construction industry of:  

• The importance of reviewing contracts from both an RCT and VAT perspective,
• The need for clear contract drafting to support correct RCT treatment, and
• The importance of appropriate price apportionment to ensure proper compliance. 

Please find link to the full Tax and Duty Manual here. 

Need support with RCT compliance? 

Should you have any queries in respect of the above or the implications for your business, please contact a member of the RSM Indirect Tax team.