Yes, QuickBooks Online can handle RCT and reverse charge VAT for an Irish building business, but only if it is set up properly. Out of the box, the Irish version has no RCT module, and the default VAT codes are built for ordinary sales and purchases, not construction.

The good news is that a correct setup takes care of most of the problem. Your subcontractor bills go in without VAT, the reverse charge lands in the right boxes on your VAT3, and your RCT deductions sit in their own account, ready to match what Revenue shows in ROS. This post explains what that setup looks like, the mistakes we see most, and a simple monthly routine you can follow.

What QuickBooks Online does and doesn’t do for RCT

RCT itself lives in ROS, not in your accounting software. When you take on a subcontractor, you notify Revenue of the contract. Before every payment, you notify Revenue again, and Revenue tells you what rate to deduct: 0%, 20% or 35%, depending on the subcontractor’s tax record.

QuickBooks Online will not send those notifications for you. What it can do, once set up properly, is:

• record each subcontractor’s bill at the right amount, with no VAT on it
• show the RCT you deducted as money you owe Revenue, not as an expense
• pay the subcontractor the net amount and keep a clear trail of every deduction
• produce figures that agree with your monthly deduction summary in ROS

We covered some of the gaps in the Irish version in QuickBooks vs. Xero vs. Sage – What’s Most Frustrating?. The fix for construction firms is not a different package. It is a setup built for how RCT and reverse charge actually work.

Setting up subcontractors and RCT deductions in QuickBooks

An RCT-ready file starts with your subcontractors. Each one is set up as a supplier, with their tax reference and current RCT rate noted, so whoever enters the bills knows what applies.

Next comes a separate liability account for RCT deducted. When you pay a subcontractor €10,000 at the 20% rate, €8,000 goes to them and €2,000 sits in that account until you pay it over to Revenue. Your expenses still show the full €10,000 cost of the work, which is what your job costs and your accountant need to see.

If you also work as a subcontractor for bigger contractors, the same thinking applies in reverse. RCT deducted from your payments is tax you have already paid, so it is recorded as money owed back to you, not lost income.

How to set up reverse charge VAT so it lands in T1 and T2

Where RCT applies to construction work, VAT works differently. Your subcontractor does not charge you VAT. Instead, you as principal contractor account for it yourself, at the rate that applies to the work (often 13.5%).

On your VAT3, that VAT goes in T1 as VAT on sales. If you are entitled to reclaim it, the same amount goes in T2 as VAT on purchases. For most builders the two cancel out, but both entries still have to be there.

In QuickBooks this means a reverse charge tax code that posts to both sides of the return at once. Without it, people either leave the VAT off completely or post it as normal purchase VAT, and the VAT3 is wrong either way. Users in the Intuit community have struggled with this for years, often building their own codes by trial and error.

A few other points a proper setup covers:

• subcontractor bills entered without VAT, matching the invoice
• invoices you issue as a subcontractor carrying the reverse charge wording and no VAT
• normal supplies, like materials from the builders’ merchant, kept on ordinary VAT codes

Two builders we’ve set up RCT-ready and VAT-ready

Our first example is a builder who moved over from England to build three houses in Limerick. He was used to the UK’s CIS scheme, so Irish RCT and reverse charge VAT were new to him. He was already using Dext and QuickBooks, but the file was not set up for how construction tax works in Ireland.

Here is what we did:

1. Set up QuickBooks RCT-ready and VAT-ready, with his subcontractors, RCT accounts and reverse charge codes in place.
2. Kept his routine simple. He snapped his purchase bills into Dext, which sent them through to QuickBooks.
3. Made paying subcontractors easy. When he wanted to pay someone, he sent us a WhatsApp. We handled the RCT notification and deduction, and processed his VAT properly.
4. Trained him on the key points, so he understood what he was looking at and could use QuickBooks with confidence.
5. Gave his accountant their own access, so they could keep an eye on the figures throughout the year.

He got on with building. The tax side ran in the background, and his books were in shape whenever his accountant looked at them.

“I need you to talk to my son, he could really do with a system like this!”

Our second example is a Dublin builder with 20 years in the trade. He employs three workers and uses around ten subcontractors, so RCT and reverse charge come up every month.

• His QuickBooks is set up RCT-ready and VAT-ready.
• As subcontractor and supplier bills come in, they go into Dext and flow through to QuickBooks.
• His bookkeeper has been trained on how to use the information, so the RCT and VAT entries are right each month.

The two set-ups look different. One owner hands the payments to us by WhatsApp; the other has a bookkeeper running things in-house. The foundation is the same: a QuickBooks file built for RCT and reverse charge, and people trained to use it.

RCT and VAT mistakes that cost builders money

These are the problems a proper setup is designed to prevent:

• Paying before notifying Revenue. Every payment to a subcontractor needs its own notification in ROS first. A notification for a previous payment does not cover the next one.
• Reverse charge left off the VAT3. If you don’t self-account for the VAT, Revenue treats it as a default, even when the T1 and T2 figures would have cancelled out.
• VAT posted as ordinary purchase VAT. The subcontractor’s bill gets a normal VAT code, so the return shows a reclaim with no matching T1 entry.
• RCT recorded as an expense. The deduction disappears into costs instead of showing as money owed to Revenue, so nothing agrees with ROS.
• RCT tracked in a separate spreadsheet. It works until the spreadsheet and QuickBooks drift apart.

The penalties are real. Revenue charges from 3% to 35% of each unreported payment, depending on the subcontractor’s rate (Revenue). Revenue also cross-checks eRCT data against VAT and payroll returns (Chartered Accountants Ireland).

A monthly RCT and VAT routine that fits around site work

Once QuickBooks is set up, the routine is short:

1. Bills in. Snap subcontractor and supplier bills into Dext, or enter them in QuickBooks, using the right codes.
2. Notify before you pay. Make the payment notification in ROS and note the deduction rate Revenue gives you.
3. Pay the net amount. Record the payment in QuickBooks, with the RCT going to its own account.
4. Check the deduction summary. Compare Revenue’s monthly summary in ROS with QuickBooks and file it by the 23rd of the following month.
5. File the VAT3. Your reverse charge figures are already in T1 and T2.

If you want to see which jobs make money, QuickBooks Projects can track income and costs per house or contract on the same entries.

You can run this yourself, have your bookkeeper run it, or hand the RCT and VAT side to us. Our two examples above show both.

Getting your QuickBooks set up RCT-ready and VAT-ready

QuickWorks works only with QuickBooks, and we set up builders’ files for RCT and reverse charge VAT from the start. That includes:

• Setup: subcontractors, RCT accounts and reverse charge codes built in, whether you are new to QuickBooks or moving from Sage, Xero or spreadsheets
• Training: we show you or your bookkeeper the key points, so you know what you are looking at
• Ongoing help: monthly support if you want a hand keeping it right, or for us to look after the RCT and VAT side
• Your accountant stays involved: they can have their own access to keep an eye on the figures

If you are setting up QuickBooks from scratch, our guide to the 10 essential setup steps is a good place to start. If you already have a licence, our Switcher Package gives you 15% off your subscription.

Want your QuickBooks set up RCT-ready and VAT-ready? Book a free discovery call and we’ll look at how your business runs.