Finance Act, 1970

Tax deductions from payments to sub-contractors in the construction industry.

17.—(1) In this section—

“construction contract” means a contract (not being a contract of employment) whereby a person (in this section referred to as the contractor) is liable to another person (in this section referred to as the principal)—

(a) to carry out construction operations; or

(b) to be answerable for the carrying out of such operations by others, whether under sub-contract to him or under other arrangements made, or to be made by him; or

(c) to furnish his own labour or the labour of others, in the carrying out of such operations;

“construction operations” means operations of any of the following descriptions—

(a) the construction, alteration, repair, extension, demolition or dismantling of buildings or structures;

(b) the construction, alteration, repair, extension or demolition of any works forming, or to form, part of the land, including walls, road-works, power-lines, aircraft runways, docks and harbours, railways, inland waterways, pipelines, wells, sewers, industrial plant and installations for purposes of land drainage;

(c) the installation in any building or structure of systems of heating, lighting, air-conditioning, sound-proofing, ventilation, power supply, drainage, sanitation, water supply, burglar or fire protection;

(d) the external cleaning of buildings (other than cleaning of any part of a building in the course of normal maintenance); internal cleaning of buildings and structures, so far as carried out in the course of their construction, alteration, extension, repair or restoration;

(e) operations which form an integral part of, or are preparatory to, or are for rendering complete such operations as are described above, including site clearance, earth-moving, excavation, tunnelling and boring, laying of foundations, erection of scaffolding, site restoration, landscaping and the provision of roadways and other access works.

(2) Subject to the provisions of this section, where in the performance of a construction contract, whether made before or after the commencement of this section, in the case of which the principal is—

(a) a person who, in respect of the whole or any part of the construction operations to which the contract relates, is himself the contractor under another construction contract, or

(b) a person carrying on a business which includes the erection of buildings,

the principal makes a payment to another person (whether the contractor or not and hereinafter referred to as the sub-contractor), the principal shall deduct from the payment and pay to the Collector tax at the rate of 7s. 0d. in the pound (or at the rate, to which it is equivalent, of thirty-five per cent.) on the amount of such payment.

(3) In computing, for the purposes of Schedule D, the profits or gains arising or accruing to a sub-contractor who receives a payment from which tax has been deducted in accordance with subsection (2), the payment shall be treated as being of an amount equal to the aggregate of the net amount received after deduction of the tax and the amount of the tax deducted.

(4) In so far as a sub-contractor is chargeable to tax in respect of any profits or gains arising or accruing to him from a trade or vocation, he shall be treated as having paid on account of tax so chargeable any tax which was deducted from payments brought into account in the computation of those profits or gains and which has not been repaid or for which a set-off has not been given; and the Revenue Commissioners shall make regulations for giving effect to this subsection and those regulations shall in particular include provision—

(a) as to the manner in which, and the periods for which, tax deducted under this section is to be brought into account as a sum paid on account of the liability to tax of a sub-contractor,

(b) for repayment, on due claim made for a period (hereinafter referred to as the repayment period) commencing on the 6th day of April in a year of assessment and ending on the 5th day of the month following the date of the payment or, if the payment was made on or before the 5th day of a month, ending on the 5th day of that month, of such portion of the tax deducted from payments received by a sub-contractor during the repayment period (reduced by any amount of such tax repaid or set off) as appears to the Revenue Commissioners to exceed the proportionate part of the amount of tax for which he is liable, or is estimated to be liable, for that year of assessment, and

(c) for repayments in cases where the total of the tax deducted from payments received by a sub-contractor and not repaid to him exceeds the amount of tax for which he is liable.

(5) The Revenue Commissioners shall make regulations with respect to the assessment (including estimated assessment), charge, collection and recovery of tax deductible under subsection (2) and those regulations may in particular include, in relation to such tax, any provision which is or might be contained in regulations made under section 127 of the Income Tax Act, 1967 .

(6) Section 132 of the Income Tax Act, 1967 , shall apply in relation to sums due on account of tax deductible under subsection (2) as it applies in relation to sums for which an employer is liable under that section.

(7) Where, in any year of assessment, a sub-contractor satisfies the Revenue Commissioners that he has an established place of business and—

(a) had delivered to them accounts of his trade or vocation for the purpose of computing the profits or gains on which he is chargeable to tax for the year preceding the year of assessment, or

(b) has delivered, or has undertaken to deliver, to them accounts of his trade or vocation for the purpose of computing the profits or gains on which he is chargeable to tax for the year of assessment,

the Revenue Commissioners shall issue to him a certificate in respect of a year of assessment which will, on production thereof by him to a principal, entitle him to receive without deduction of tax any payments which are made to him by the principal in the year of assessment to which the certificate relates and which are made subsequent to the production of the certificate.

(8) Schedule 15 to the Income Tax Act, 1967 , is hereby amended by the insertion in column (2) thereof of “Regulations under section 17 of the Finance Act, 1970”.

(9) Every regulation made under this section shall be laid before Dáil Éireann as soon as may be after it is made and, if a resolution annulling the regulation is passed by Dáil Éireann within the next twenty-one days on which Dáil Éireann has sat after the regulation is laid before it, the regulation shall be annulled accordingly, but without prejudice to the validity of anything previously done thereunder.

(10) A person carrying on a business shall not be deemed to be a person of a kind specified in subsection (2) (b) by reason only of the fact that, in the course of that business, he erects buildings for the use or occupation of himself or employees of his.

(11) This section shall come into operation on such day as the Minister for Finance by order appoints.