RCT Update Ireland: What the New Guidance on Mixed Contracts Means for Your Business
Revenue has recently updated its guidance on Relevant Contracts Tax (RCT), with important clarifications on how the rules apply to mixed contracts.
While this may sound technical, the changes have practical implications for businesses operating in construction, engineering, and related sectors.
In this article, we explain what has changed and what it means in practice.
What Is Changing?
Revenue issued updated guidance in early 2026 clarifying how RCT applies to contracts that include both construction and non-construction elements.
The key update is this:
RCT applies only to the construction element of a contract, not the entire contract.
This is a significant clarification compared to earlier interpretations.
What Is a “Mixed Contract”?
A mixed contract is one that includes:
- Construction services (within RCT scope)
- Non-construction elements (outside RCT scope)
Common examples include:
- A contract for construction work and the sale of land
- Design and build contracts
- Supply and installation contracts
In practice, many real-world contracts fall into this category.
Key Rule: Apportionment Is Required
Where a contract includes both RCT and non-RCT elements, the principal contractor must split (apportion) the contract value.
This means:
- Only the construction portion is subject to RCT
- The non-construction portion is excluded
Importantly, this applies even where there is a single overall contract price.
As a result, Revenue expects businesses to:
- Review the actual contract terms
- Identify the different elements
- Allocate value accordingly
Why This Matters
This clarification changes how many contracts should be treated in practice.
Previously, there was a risk that the entire contract could be treated as subject to RCT.
Now, only the relevant construction portion should be included.
As a result, this can have a direct impact on cash flow, particularly where RCT is deducted at 20% or 35%.
In practice, many of the issues arise not from the rules themselves, but from how contracts are structured and interpreted.
Examples from Revenue Guidance
Revenue has specifically highlighted examples of mixed contracts, including:
- Design and build contracts
- Supply and installation agreements
In these cases:
- Design work is generally outside RCT
- Installation work is within RCT
- Supply of materials is outside RCT
Therefore, each element must be considered separately.
Design and Build Contracts
Design and build contracts are one of the clearest examples of a mixed contract.
For example:
- Design services may fall outside the scope of RCT
- Construction work remains within RCT
As a result, businesses cannot automatically apply RCT to the full contract value.
Instead, the contract needs to be reviewed carefully so the different elements can be identified and apportioned correctly.
Supply and Installation Contracts
Revenue also highlighted supply and installation contracts.
In these situations:
- The supply of materials is generally outside RCT
- Installation work is usually within RCT
Therefore, businesses must distinguish between the two elements rather than treating the contract as a single construction service.
This is particularly important where one overall contract price has been agreed.
No Change to Who Must Operate RCT
The updated guidance also reflects changes introduced by the Finance Act 2025.
However, importantly, there is no change to the range of businesses required to operate RCT.
This means:
- The same businesses remain within the RCT system
- The update mainly affects how contracts are assessed, not who is included
Practical Risks for Businesses
While the update provides clarity, it also introduces practical challenges.
In particular, businesses now need to:
- Carefully review contracts before applying RCT
- Ensure correct apportionment of values
- Maintain documentation supporting the split
Failure to do this could result in:
- Over-deduction of RCT (cash flow impact)
- Under-deduction (potential penalties)
Therefore, businesses should ensure contracts are reviewed properly before applying RCT treatment.
What Businesses Should Do Now
Given the update, businesses should:
- Review existing contracts to identify mixed elements
- Ensure contract values are clearly broken down
- Reassess how RCT is currently being applied
- Seek advice where contracts are unclear
In practice, this is less about new rules and more about applying the rules correctly.
How We Help
RCT can be straightforward in standard cases. However, mixed contracts introduce additional complexity.
In practice, the main challenge is not understanding the rule. Instead, it is applying it correctly to real contracts.
At Richard OShea Consultancy, we support businesses operating in construction and related sectors with:
- Reviewing contracts to identify RCT and non-RCT elements
- Advising on the correct treatment of mixed contracts
- Ensuring compliance with Revenue requirements
- Reducing the risk of over-deduction or penalties
If you are dealing with contracts that include multiple elements, it is important to get the treatment right from the outset.
You can also read our guide to Understanding Relevant Contracts Tax (RCT) for a broader overview of how the system works.
As a result, a structured review can often identify issues early and help avoid unnecessary costs.
Final Thoughts
The recent RCT update is not a complete change in the law. However, it is an important clarification that affects how contracts should be assessed in practice.
For many businesses, the key takeaway is simple:
Not all elements of a contract are subject to RCT, but you must be able to prove which parts are.
Ultimately, a structured review of contracts can help avoid both overpayment and compliance issues.
This article is intended for informational purposes only and should not be considered a replacement for professional advice. The author(s) disclaim any liability for actions taken or not taken based on the content of this document. It is recommended to seek tailored advice before making any decisions related to the topics discussed in this article.
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