RCT Subcontractor Cash Flow Ireland: Funding the 20% Deduction Gap (2026)

You've done the work. The QS has signed off a €50,000 payment. Then €40,000 lands in your account.

That missing €10,000 isn't gone. It's Relevant Contracts Tax, deducted at 20% and sitting with Revenue as a credit in your name. But your lads still want paying on Friday, and the merchant still wants paying for the cable, the timber or the steel you bought six weeks ago.

If you're a subcontractor in construction, forestry or meat processing, this is the cash flow problem nobody explains properly. Here's how RCT actually moves through your business, how long the money takes to come back, and what kind of finance genuinely helps.

How RCT Works for Subcontractors in Construction, Forestry and Meat Processing

RCT is a withholding tax. When a principal contractor pays you for "relevant operations", they notify Revenue through the eRCT system on ROS, Revenue tells them what rate to deduct, and they hold back that percentage and pay it to Revenue. You get the rest, and a deduction summary shows up on your ROS record.

It covers three sectors. Construction is the obvious one: building, repairs, demolition, installing systems, groundworks, scaffolding. Forestry covers planting, thinning, felling and sawmill processing. Meat processing covers slaughtering, boning, cutting and packing. In all three, haulage for hire counts too.

There's a VAT twist as well. On construction services covered by RCT, the reverse charge applies, so the principal accounts for the VAT, not you. You don't collect VAT on your invoices, but you still pay VAT on your materials. So most construction subbies are in a VAT repayment position.

Put that together and you've two lots of your money sitting with Revenue: RCT deducted and VAT refunds due. Neither pays your wages.

The 0%, 20% and 35% Rates, and How to Get Onto 0%

Your rate depends entirely on your compliance record:

• 0% if your tax affairs are fully up to date.
• 20% if your record is "substantially" up to date. Registered, mostly compliant, but something's slipped.
• 35% if you're not registered with Revenue or your compliance record is poor.

Here's the thing most subbies don't realise. The gap between 20% and 0% isn't usually a big tax problem. It's a late return, an unfiled VAT3, a Form 11 that went in a few weeks late.

Revenue runs rolling bulk rate reviews, and if your rate changes you'll get a notice of determination in your ROS inbox. For a company, the check can look beyond the company to its directors and main shareholders too. So a director's own late return can drag the company's rate down.

So how do you get back to 0%? Fix whatever's outstanding. File the missing returns, pay or agree a payment arrangement for any arrears, and then request a rate review yourself in ROS. If it can't be sorted in ROS, send a MyEnquiries request under "Relevant Contracts Tax (RCT)" and "RCT Rate Review" explaining why a lower rate fits.

Think about what 0% is worth. On €600,000 of annual work, a 20% rate holds back €120,000 over the year. No lender on earth will give you €120,000 of free working capital. Getting your rate fixed will.

Stuck on 35%? Fix That Before Anything Else

If you're on 35%, stop and deal with it today. At that rate a €50,000 cert pays you €32,500, and almost no business margin in construction survives that for long.

The 35% rate usually means Revenue doesn't know you, because you're not registered, or that returns have been outstanding for a long time. Either way, it's an admin problem first. Register, file everything that's missing, and agree a payment arrangement for any arrears. Then request the review.

And be honest with yourself about finance. No lender will fund a business on 35% RCT, because it tells them your tax affairs are badly out of order. Fix the rate, then talk to us.

Why a 20% Deduction Crushes Subcontractor Cash Flow

So where does the €10,000 go? Revenue credits it to your record automatically, but it only gets used once a liability falls due and the return's been filed:

• PAYE: offset once your monthly employer return is in.
• VAT: offset once your VAT3 is filed, though as a reverse-charge subbie you often have no VAT to pay.
• Income tax or corporation tax: offset once your Form 11 or CT1 is filed. You can apply it to preliminary tax too, but only after you submit a preliminary tax declaration.

Offsets happen within about a week of the liability's due date. Whatever's left over generally sits there until your annual return is filed and processed. Interim refunds are possible in some cases, but don't build your cash flow plan around one. Ask your accountant what applies to you.

Here's what a month looks like for a company on €50,000 of certified work.

That €60,000 is real money. It'll come back. But with a December year-end and a CT1 due the following September, some of it's been tied up for well over a year by the time it does.

Notice who gets hit hardest. A labour-heavy subbie, like a meat boning crew or a forestry gang, has a big PAYE bill that soaks up most of the credit every month. A materials-heavy trade, like electrical, roofing or mechanical, has small payroll and big merchant bills, so its credit piles up fastest.

Retentions and Stage Payments: The Other Two Cash Traps

RCT never arrives alone. On most jobs, it stacks on top of two other delays.

Stage payments. You submit an application for payment, the QS values it, often lower than you asked, and the certified figure gets paid 30 to 60 days later. You've funded labour and materials the whole time. The Construction Contracts Act 2013 gives you statutory payment claim notices and the right to adjudication on covered contracts, and it's worth using.

Retentions. Main contractors usually hold back a slice of each payment until practical completion, then the rest after the defects period, often a year later.

We cover the retention and stage-payment gap in detail in our guide to construction company finance. The point for RCT is simple: model all three together. Take a €50,000 cert with 5% retention: you're paid €47,500, RCT at 20% takes €9,500, and €38,000 reaches your account. Some of the missing €12,000 won't come back for over a year.

Why Invoice Finance Struggles With Applications for Payment

The first thing most subbies ask us about is invoice finance. Get paid for the work now, let the funder wait for the principal. Sounds perfect, doesn't it?

In construction, it usually isn't. Here's why funders get nervous:

• An application isn't a debt. Until it's certified, the QS can value it down. A funder lending against your application is lending against a number nobody's agreed.
• Set-off and contra charges. The main contractor can deduct for defects, delays or back-charges from what they owe you. Funders hate receivables that can shrink.
• Retentions and RCT. Of a €50,000 cert, only €38,000 might arrive. The funder can only advance against what will actually be paid.
• Assignment bans. Plenty of subcontracts prohibit you assigning the debt, which kills a factoring arrangement on the spot.
• One big customer. If most of your work is with one main contractor, the funder's taking your risk and theirs.

Some funders will advance against certified valuations from established main contractors, at a lower advance rate. That can work. But don't plan your cash flow around financing applications for payment.

Finance That Actually Works for Subcontractors

So what does work? Funding the things lenders can see.

Plant on asset finance. Your diggers, telehandlers, forwarders, vans and specialist kit are the asset lenders like most. Our asset finance covers equipment, vehicles and machinery from €20,000 to €500,000 over two to five years. Every euro of plant you finance is a euro of cash you keep for wages while RCT credit is stuck with Revenue. Our guide to construction equipment finance goes deeper on the kit itself.

Cash out of plant you already own. If you bought machines outright, asset refinance can release cash from them. It's often the quickest way to fund a build-up of RCT credit without new unsecured debt.

A short-term loan for the gap. A short-term business loan sized to your credit build-up, repaid when your CT1 refund lands, matches the problem exactly. Our fixed-term loans run from €30,000 to €300,000 over 12 to 48 months with fast decisions.

Wages first. If it's the Friday payroll that's keeping you up at night, payroll finance is built for exactly that squeeze.

And price it in. If you're on 20% and can't fix it before the job starts, the cost of carrying that credit belongs in your tender. Ask for fortnightly applications or payment for materials on site, too. Both shrink the gap before you borrow a cent.

What Lenders Check on a Subcontractor's File

When we take a subbie's case to lenders, they ask for the same things every time:

• A printout of your current RCT rate from ROS. A 0% rate is a strong signal on its own.
• Tax clearance and a ROS statement of account, so they can see the RCT credit and VAT refunds owed to you.
• Your deduction summaries for the last 12 months, which prove who's paying you and how regularly.
• Signed subcontracts and a forward order book.
• How much of your work comes from your biggest main contractor.

Here's a tip. That RCT credit on your statement of account is evidence of work done and paid for. Show it. A lender who can see €40,000 of credit due back from Revenue reads a short-term loan very differently.

And if you're on 20%, don't hide it. Tell the lender why, what you've done to fix it and when you expect the review. A subbie on 20% with a clear plan back to 0% is a far better bet than one who hasn't noticed.

Get Onto 0% and Fund the Gap, Not the Tax

RCT doesn't cost you money, but on 20% it borrows your working capital for a year at a time. The best fix is free: get every return filed, every director's affairs in order, and request that rate review.

While you're getting there, fund the things lenders can see. Put plant on asset finance, release cash from machines you own, and use a short loan to bridge the credit until your annual return clears it. Don't rely on financing applications for payment. And talk to your accountant about any interim refund you might be due.

Frequently Asked Questions