1. Training for School Accounts Personnel & Secretaries JMB Financial Support Services Unit November 2012

2. Training for School Accounts Personnel & Secretaries 1) Introduction 2) Section 1: RCT and VAT 3) Section 2: Payroll 4) Q & A JMB Financial Support Services Unit 2

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4. RCT & Vat Revenue Online System (ROS ) Relevant Contract Tax (RCT) Value Added Tax (VAT) Statutory RCT and VAT returns Processing RCT and VAT on accounting system 4

5. Register for ROS 3 Steps to Register for ROS 1- Apply for a ROS Access Number (RAN) 2- Apply for a Digital Certificate 3 -Retrieve your Digital Certificate 5

6. Relevant Contract Tax (RCT) A school board of management, in its capacity as a body established by statute and funded wholly or partly from funds provided by the Oireachtas, is designated as a “Principal Contractor”. 6

7. RCT –Principal Contractor A school as a “Principal Contractor” must : 1. Notify Revenue of all contracts online (Contract Notification) 2. Notify payments online (Payment Notification) 3. Provide a copy or details of the Deduction Authorisation to the Subcontractor 4. Submit monthly/quarterly returns online (Deduction Summary/Return) 5. Make payments of RCT deducted 7

8. RCT - System RCT is an electronic system – no paper forms. All transactions notified through ROS 1. – Contract Notifications 2. – Payment Notifications/Deduction Authorisations 3. – Deduction Summary/Return 8

9. RCT - Construction Operations Means operation of any of the following descriptions: of 9 Construction Alteration Repair Extension Demolition Dismantling Buildings or Structures

10. RCT - Construction Operations in of any any systems Inserted by 2012 Act * 10 Installation Alteration * Repair * Buildings or Structures Heating Lighting Air-Conditioning Sound Proofing Ventilation Power Supply Drainage Sanitation Water Supply Burglar Fire Protection Telecommunications

11. if carried ofout in course of 11 External Cleaning Internal Cleaning Buildings and Structure s Construction Alteration Extension Repair Restoration RCT - Construction Operations

12. RCT- Registering a contractor.  The school is obliged to provide Revenue with details of the sub- contractor (name and tax reference number) and contract (location, start/end dates, estimated contract value, etc) through ROS. If the name entered on ROS is different in any way the sub-contract will be rejected by Revenue.  This process is known as ‘Contract Notification’ 12

13. Revenue Verification Contact Revenue by email if you need confirmation that a contract is subject to RCT or Reverse VAT Charge Retain this email on file for Revenue inspection. 13

14. Revenue Verification The nature of the contract may be examined by the Revenue Commissioners, the Department of Social and Family Affairs, the Department of Enterprise, Trade and Employment and the National Employment Rights Authority (NERA). If a contract of employment was incorrectly classified as a relevant contract, the Principal will be liable to pay the PAYE, USC and PRSI that should have been deducted together with interest and penalties as appropriate. 14

15. RCT- Registering a Contractor. If the school has no tax reference number for the sub-contractor when notifying the contract, it will be asked to provide additional details for the sub- contractor (name, address, phone number, date of birth, etc) so that Revenue can contact the sub- contractor directly. 15

16. RCT –Sub-Contractor’s Rate Revenue will determine the sub-contractor’s rate based on the sub-contractor’s tax compliance record. 0% - tax applies if the sub-contractor is fully tax compliant 20% - tax applies if the sub-contractor is substantially tax compliant 35% - tax applies if the sub-contractor has compliance issues or is unknown to Revenue 16

17. RCT – Contract Notification The School must notify each contract to Revenue Complete the declaration on employment status Enter the sub-contractor’s name and Tax Reference Confirm whether the sub-contractor has a fixed place of abode Supply contract details, including sector, nature of work, location, estimated value and duration of contract. May have to answer questions on employment status of sub-contractor Facility for batch input and upload onto ROS website ( limited to 10 Contract Notifications per batch). 17

18. RCT – Contract Notification School has a statutory obligation to be satisfied as to the identity of the sub-contractor Retain evidence of identity e.g. copy of driver’s license, passport etc. 18

19. RCT – Contract Notification (Cont.) On submission of contract details: the school will immediately receive an acknowledgement on ROS inbox (includes contract ID number) Sub-contractor will be notified by Revenue No payment can be made to a sub-contractor unless the contract has first been notified to Revenue Multiple contracts with a sub-contractor. The school must notify each contract unless they are all part of one ongoing relevant contract with the same sub-contractor. 19

20. RCT- Payment Notification Revenue must be notified of each payment before paying the sub-contractor.  The school must notify Revenue online immediately before making a payment to a sub-contractor  Notifying a payment  Select contract from list and input gross payment amount  The Revenue system will immediately calculate the net payment and tax to be deducted  Submit details to Revenue  Facility for batch input and upload onto ROS (Limit 100 per batch) 20

21. RCT- Payment Notification Penalties will apply for making a payment to a sub- contractor without prior notification to Revenue. The Act introduces a penalty of up to €5,000 for each any every payment which is made by a Principal Contractor without first obtaining a Deduction Authorisation 21

22. RCT Payment Notification and Deduction Authorisation (Cont.) Enter the gross payment in the box as indicated.  The gross payment is the amount including VAT when the Reverse Vat Charge does NOT apply  When Reverse VAT Charge applies enter the payment amount before Vat. 22

23. RCT Deduction Authorisation 23  Deduction Authorisation is issued to the School’s ROS inbox by Revenue in response to Payments Notification ( instantaneous)  Specifies the rate and amount of tax to be deducted from the payment  Valid until the earlier of :  Making a payment  Due date for return or  Actual date return made  School must give copy/details to sub-contractor  RCT credit applied immediately to sub-contractor’s tax record

24. RCT Post Payment Notification This can be used where there is a technology failure The Principal must make the Post Payment Notification as soon as the technology issue is rectified The Principal is deemed to have deducted the tax from the payment in accordance with the terms of a valid Deduction Authorisation The Post Payment Notification is deemed to have been made in the period in which the Principal notified the payment to Revenue 24

25. RCT – Post Payment Notification (Cont.) Revenue has agreed that a school which made a payment prior to being registered for RCT and VAT may use the Post Payment Notification This means the gross amount of the contract is notified but RCT and VAT will not be applied 25

26. Payment Notification Cont. Options available to the School  Looking up Payment Notifications (PN)  Amending a PN ( if gross payment amount is wrong)  During return period: You cannot amend the gross payment on a PN. The PN must be cancelled and a new PN completed  After end of return period and before due date for return: You can amend the relevant line item on the Deduction Summary  Sub-contractor will be notified (if tax was deducted from payment) 26

27. RCT Deduction Summary (DS) 27  DS is issued by Revenue at the end of each return period (monthly, quarterly)  Pre-populated by Payment Notification process  Lists payments notified (1 line item per PN)  Identifies total tax due to be paid by the school  School should check Deduction Summary  If details correct, no further action required  If details not correct, the school should amend the relevant line item(s)

28. RCT Deduction Summary (DS) (Cont.) 28 No amendments required: If details are correct, no further action required- DS will be deemed to be return Amending the Deduction Summary (DS)  Amend a line item (e.g. amend gross payment amount)  Carry forward a line item into the next return period (where payment was made after end of the return period but BEFORE due date for return).  Cancel a line item (where payment not made to sub- contractor)  Adding payments not previously notified.

29. RCT Payment Dates Due Date for Paying RCT If paying online - payment of tax due on or before 23 rd day after end of return period If not paying online - payment of tax due on or after 14 th day after end of return period - This option is no longer available Amending a return AFTER the due date has passed Payments not previously notified by Principal can be added to return Principal cannot amend line items- must contact local revenue district. A surcharge of €100 may apply. 29

30. RCT –Summary 1. Deduct tax at rate directed (0%,20%, 35%) 2. Revenue will provide a Deduction Summary 3. Keep a copy of the Deduction Summary 4. Provide a copy of the Deduction Authorisation to the sub-contractor 5. Make return at the end of the return period 6. Pay the tax deducted to the Revenue 7. Keep records 30

31. VAT- Reverse Charge  A system known as the “reverse charge” applies to VAT payments in respect of construction operations (excluding haulage).  In effect, Principal Contractor pays the VAT to Revenue rather than the sub-contractor.  Bodies who are principal contractors for the purposes of RCT and who receive construction services must be registered for VAT. 31

32. VAT- Reverse Charge  Schools are required to be registered for VAT.  Schools can register for VAT on ROS or using a standard form.  School register for VAT on a cash or invoice basis  Schools are not entitled to deductibility for VAT incurred, therefore the VAT on Purchases figure at T2 in the VAT 3 form will be NIL.  The VAT payable to Revenue will be the full amount of the VAT arising on the construction services. This figure will be at T3 (Vat3 return form). 32

33. VAT- Reverse Charge /RCT – Professional Fees Reverse charge rules do not apply to payments to  architects,  quantity surveyors,  engineers or  design teams. It does not apply to Professionals within the construction indus try 33

34. VAT- Reverse Charge Retention Payment If a contract provides for a period of retention the invoice in respect of retention money should be raised within 15 days of the end of the month in which the guarantee period expires. VAT should be accounted for by reference to the date the invoice is raised or should have been raised. 34

35. VAT- Reverse Charge Repair and Maintenance contracts If the contract provides for a single consideration for the repair and maintenance then reverse charge should apply to the full consideration. If the contract provides that a separate charge should apply where repairs are necessary then only the consideration applicable to the repairs is subject to reverse charge. Each case should be examined on its own merit. 35

36. VAT- Reverse Charge  Where a Principal Contractor receives construction services other than haulage for hire, they must account for VAT under the VAT Reverse Charge.  Where a sub-contractor provides both construction services and other services, as part of a contract, they should provide separate invoices.  The school should account for VAT on the construction services  The sub-contractor should account for the VAT on the other services  If any part of the contract is liable to RCT, the whole contract is liable to RCT. 36

37. VAT- Reverse Charge Invoicing  “Vat on this supply to be accounted for by the Principal Contractor”  Supplies of good or services other than construction services  Supplier should issue two separate invoices VAT invoice for supplies of goods or services other than construction services VAT reverse charge invoice for construction service provided Both invoices liable to RCT if part of a construction contract 37

38. Example Board engages a sub-contractor to build and fit out a new gym. Construction costs - €500,000 (VAT exclusive) Fitting out of gym - €100,000 (VAT exclusive) 1. Sub-contractor will issue a VAT invoice for €100,000 plus VAT at 23%.(Not a construction service) = Total invoice €123,000 2. Sub-contractor will issue VAT reverse charge invoice for €500,000 (construction contract). = Total invoice €500,000 38

39. Example (Cont.) School will account for the VAT as follows  VAT on Construction Service €500,000@13.5%  Total VAT =€500,000 x 13.5% =€67,500 (T1 in VAT return)  No credit can be claimed for VAT incurred on gym fittings  The VAT must be paid on the due date per the VAT return 39

40. Example (Cont.) Board will account for RCT as follows: Board will make Payment Notification as follows: Construction Service(VAT exclusive) €500,000 GYM fitting (other service)(VAT inclusive) €123,000 Total payment notification =€500,000 + €123,000 =€623,000 If 20% applies RCT liability will be €623,0000* 20% = €124,600 Sub-contractor will be paid Construction costs = €500,000(VAT exclusive) Fitting out of gym = €123,000(VAT 1nclusive) Total Cost = €623,000 LESS RCT = (€124,600) This RCT will show up on your ROS summary Sub-contractor paid =€498,400 40

41. VAT Return Vat returns are usually every two months. Electronic VAT return using ROS is due by the 23rd of the month following the period selected. Vat return made using the paper format sent by post must be received by 19 th of the month E.g. September/October return must be completed by the 23rd of November or 19 th of November 41

42. Exempt from VAT Reverse Charge Supply and installation of fittings are not services within the scope of the reverse charge legislation. A supplier should issue a separate VAT invoice charging VAT at 23% for the element of the contract which relates to supply and installation of fittings. 42

43. Exempt from VAT Reverse Charge Examples of fittings include: Blinds (most types) Clocks including time clocks such as flexi-time equipment Cooker hoods Curtains Electric and gas fires Exhibition stands Fitted carpets and lino, other than floor covering stuck down over its entire surface Freestanding shop counters Kitchen cookers Lighting other than recessed lighting Mirrors Most shelving Refrigeration units, including deep freezes Safes (certain) Seating, including cinema and church seating whether or not secured to the floor Snooker tables and other games tables Washing machines and dishwashers, including plumbed-in machines. 43

44. Tax Clearance In the case of all public sector contracts of a value of €10,000 (inclusive of VAT) or more within any 12- month period, the sub-contractor will be required to either  produce a current Tax Clearance Certificate, or  demonstrate a satisfactory level of sub-contractor tax compliance. 44

45. Processing RCT and VAT on Accounting System Due to the large number of schools using the TAS system, the screen shots in this document are from TAS. Part 1 of the document shows set-up and posting requirements for schools using the Cash Receipts basis of accounting and Part 2 shows setup and posting requirements for those using the Creditors Module. 45

46. Processing RCT and VAT on accounting system Part 1: RCT and VAT postings – Cash Receipts basis of accounting Set up two new nominal codes. 2260 – Reverse VAT 2270- Relevant Contract Tax (RCT) 46

47. Processing RCT and VAT on accounting system Posting when making a payment to the supplier e.g. Mr Joe Bloggs paints the school for €10,000 and gives an invoice to the school. Reverse Vat @13.5% = €10,000 x 13.5%= €1,350 RCT @ 20% = €10,000 x 20% = €2,000 Enter the payment on TAS using “Enter/Change Cash Payment” 422 47

48. JMB.ie 48 School Finance area – no password required All information on RCT and VAT Reverse Charge available TAS posting information available Link to www.revenue.ie is available on JMB website

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50. Definitions and Rates - PAYE Standard Rate: 20% Higher Rate: 41% Marginal Relief Rate: 40% Standard Rate Cut-Off Point (SRCOP) Single/Widowed Person or Surviving Civil Partner, without dependent children: First €32,800 @ 20%, Balance @ 41% Single/Widowed Person or Surviving Civil Partner, qualifying for the One Parent Family tax credit: First €36,800 @ 20% Balance @ 41% Married or Civil Partnership, one Spouse or Civil Partner with Income: First €41,800 @ 20% Balance @ 41% Married or Civil Partnership, both Spouses or Civil Partners with Income: First €41,800 plus an amount equal to the second spouse or civil partner’s income (subject to a maximum of €23,800) @ 20% Balance @ 41% JMB Financial Support Services Unit 50

51. 51 With a PPS Number A. Weekly Paid SRCOP Tax Credits Weeks 1 to 4 €631 €32 Weeks 5 to 8 €631 Nil Weeks 9 onwards Nil B. Monthly Paid SRCOP Tax Credit Month 1 €2,734 €138 Month 2 €2,734 Nil Month 3 onwards Nil Where an employee does not provide a PPS number the higher rate of 41% applies to all earnings under the Emergency Basis. Definition and Rates- Emergency

52. Definitions and Rates - PRSI Class A Employee threshold €352 per week and employer €356 per week Rate 4% 4.25% / 10.75% PRSI Free Allowance for Class A Employees Weekly Fortnightly Monthly €127 €254 €551 Class J Employer 0.5% 52

53. Definitions and Rates - USC Exemption from USC: Annual Income less than €10,036. Cumulative from 1 st January 2012 Age under 70 years (No Medical Card) USC Rate 1.2% COP €193 €386 €837 €10,036 USC Rate 2.4% COP€308 €616 €1,335 €16,016 USC Rate 3.7% Balance 53

54. Definitions and Rates - PRD Annual Weekly Fortnightly Monthly % First: €15,000 €288.46 €576.92 €1,250.00 Exempt Next: €5,000 €96.16 €192.31 €416.67 5% Next: €40,000 €769.23 €1,538.46 €3,333.33 10% Balance: 10.5% 54

55. Statutory Returns Payslips P30, P35, P60, PRD P60, PRD P35 P45 Returns to Revenue Returns to DES Printing off reports 55

56. NERA www.nera.ie Requirements for contracts, rest breaks, holidays Documentation and filing requirements JMB Financial Support Services Unit 56

57. School records for Payroll Weekly/Monthly records: payslips, gross to net Periodic: P30 Annual: P35, P60, PRD P35, PRD P60 P45 Year end file each year for standard reports Printing off reports 57

58. Authorisation for Payroll Weekly/Monthly signed authorisation by Principal Annual authorisation of submissions Changes in pay rates from Board Holiday pay, overtime, sick leave approved by Principal All above to be kept on file 58

59. SEC Payroll 59 J rate of PRSI applies to all SEC payments Change rate back to Class A after SEC payroll has been run PRD retained by DES Guidelines issued annually by SEC – this will be sent to the Principal – refer to this document prior to processing SEC payroll Form PRD10 to be completed by each person you deduct PRD from

60. Other payments S & S After School Study Musicals – payments to musical directors and musicians Short term courses for TY Coaches Canteen personnel 60

61. Revenue Audit The Revenue Commissioners will contact the school by letter indicating the date and time that they wish to attend the school to carry out the audit The letter will state the name of the Inspector who will carry out the audit If for some reason the date assigned does not suit the Principal, contact the Inspector and reschedule the audit. The Inspector will only reschedule where a valid reason is given The letter will state the period required for audit. This is usually one year’s payroll records but may extend beyond that Payroll information for the period required should be filed neatly and in order in a separate file. This will usually include the payroll records and the cheques listing for the stated period 61

62. Revenue Audit (Cont.) Only information for the stated period should be provided initially. The Inspector may request further information over the course of the audit A room should be set up for the Inspector. The audit should not be conducted in the office of the Principal or where the payroll is processed All payments for expenses to the Principal, the Chairperson or any teachers must be properly vouched and approved All payroll transactions should have the correct tax, income levy, PRD and PRSI applied Exemptions from any of the above must be verified by medical card evidence etc If you require any further information, or are selected for Revenue Audit, you should contact your accountant and the FSSU. Usually your accountant will attend 62

63. We would appreciate it if you would complete the evaluation form.