RCT Payments cards are valid for the tax year of issue only. The one which issued on 01/12/08 expired on 31/12/08 and should have been renewed. You will note that the card, in addition to the "issue date" and the "date effective from" also has the tax year printed on it. As the sub-contractor had a valid C2 then a payments card for 2009 would presumably have issued had you applied for one. Unfortunately the existence of a C2 is insufficient to justify paying the sub-contractor gross. As a Relevant Psyments Card was not applied for then RCT should have been deducted from all payments made to that sub-contractor. The principal contractor is technically liable for all RCT which ought to have been deducted from the sub-contractor ( but see below ). The full regulations on this are available in the Revenue Guide on RCT for principals. Revenue are pretty strict when it comes to RCT.
If you think of it, cards cannot really be issued valid for a year from date of issue, otherwise if you get a card on 01/06/08 for someone, then that would expire 01/06/09 and you'd need another card in the same tax year, that would get too cumbersome given the number of sub-contractors and the times of issue. Cards have always only been valid for the tax year so the principal may be hoping for a defense here which is not likely to be accepted by Revenue at all, especially if they have been a principal contractor for a number of years.
You might note, that on the face of the paper RCT35 which would have been sent to the principal contractor there is a section handling errors. It states :-
Principals or their advisors may find instances where a payment was made gross to a valid C2 holder :
- in the absence of an RCT47 (payments card) or
- in excess of the income limit specified on the card
Where there is an exceptional failure to deduct tax a fixed penalty (currently €3,000) will concessionally apply to every breach where full disclosure and the accompanying payment are sbumitted within 1 month of the filing date of the Form RCT35. Failure to comply will render the Principal liable for the RCT that should have been deducted plus interest and penalties.
That might be worth noting in the circumstances of the sub-contractor involved.