Sep 16

2026

CIS in the UK and RCT in Ireland: what builders working both sides must get right

CIS and RCT both withhold tax from payments to construction subcontractors, but they are separate systems. UK Construction Industry Scheme status does not carry into Ireland, and Irish Relevant Contracts Tax status does not carry into the UK. Businesses crossing the border need separate registrations and must follow the rules for the jurisdiction where the work is carried out.

The two systems side by side

Why the rate is set by the tax authority

Under CIS, HMRC tells a contractor whether to pay a verified subcontractor gross, deduct 20%, or deduct 30% where the subcontractor cannot be verified as registered. The gross-payment turnover test is currently £30,000 for a sole trader, £30,000 per partner/director or £100,000 for the partnership/company, subject to the other qualifying conditions.

In Ireland, Revenue determines an RCT rate of 0%, 20% or 35% according to the subcontractor’s compliance position. An up-to-date compliance record can qualify for 0%; there is no general three-year compliance requirement.

A principal must notify Revenue of the contract and submit a payment notification before making each relevant payment. Unreported payments attract percentage penalties according to the subcontractor’s status.

The same discipline matters when HMRC opens a compliance check.

Where cross-border builders trip up

An established UK subcontractor may still need Irish RCT registration before carrying out relevant operations in Ireland. A clean CIS history does not itself determine the Irish rate. Likewise, an Irish subcontractor doing UK construction work must comply separately with CIS verification and registration rules. RCT can apply to work carried out in Ireland even where the principal or subcontractor is non-resident.

This can create a cash-flow difference, particularly on early cross-border contracts. Our guide to RCT and cash flow for UK contractors working in Ireland explains how to plan for it, while our cross-border accounting and tax specialists can coordinate the registrations and reporting.

The VAT layer

The UK domestic reverse charge applies to many standard- and reduced-rated construction services reported under CIS where the supplier and customer are UK VAT registered and no relevant exclusion applies.

Ireland also operates a VAT reverse charge for construction services supplied by a subcontractor to a principal where RCT applies. Revenue states that RCT is calculated on the VAT-exclusive payment. Unlike CIS, Irish RCT is not simply a deduction from “labour only”; it applies to the relevant payment under the contract. See VAT compliance across the UK and Ireland border for the wider position.

What contractors should do

Register separately before work starts, verify or notify through the correct system, and retain deduction authorisations and payment records. Under CIS, genuine materials costs paid by the subcontractor can be excluded from the amount on which the deduction is calculated. Do not assume the same labour/material split applies to RCT.

Reconcile deductions through monthly management accounts and keep sterling and euro transactions under a consistent policy, as covered in what cross-border SMEs get wrong with multi currency accounting.

Our SME business advisory team can help establish parallel processes, while forensic accounting specialists can reconstruct historic deductions where records no longer agree.

If your construction business is taking on its first cross-border contract, talk to SCC Chartered Accountants before the first subcontractor payment is made.