Category: GST/HST

HST Implementation – Must know

On July 1st 2010 the Ontario Government will be replacing its current retail sales tax with a new tax harmonized with the Federal Goods and Services Tax (“GST”) known as the Harmonized Sales Tax (“HST”). There are a number of rules dealing with the transition period from the date of the original announcement to July 1st 2010 that must be complied with. To find out more about how HST will affect your business I invite you to continue reading.

Small Business Transitional Credit

To help small businesses with the transition to the HST the Ontario government is providing eligible businesses with a one-time credit of between $300 and $1,000. The credit should help off-set some of the additional costs that businesses may incur, for example updating computer systems, upgrading accounting systems, upgrading point of sale terminals, and invoices, sales receipts and expense reports to name a few. To be eligible for the transitional credit the business must make taxable supplies, be registered under the Excise Tax Act, be an Ontario Business and not be a listed financial institution. Businesses with over $2,000,000 in taxable revenues are also not eligible for the credit.

Total Quarterly Taxable Revenues Amount of Credit
$0-$15,000 $300
$15,001 – $50,000 2% of taxable revenues
$50,001 – $500,000 $1,000

For more information on Small Business Transition support please visit the Province of Ontario Website: http://www.rev.gov.on.ca/en/taxchange/publications.html. The federal government also has some useful information http://www.cra-arc.gc.ca/nwsrm/txtps/2010/tt100601-eng.html. You are also invited to contact your small business accountant

Registering for HST

If your business is already registered for GST your business is automatically registered for HST. Your HST will be filed according to your current GST filling schedule. If you are not currently registered for HST you may be required to register. For more details contact your tax accountant Generally a for profit business is required to register for HST/GST when its total taxable goods and services exceeds $30,000 in 4 consecutive quarters, or $30,000 in one quarter. Limousine and Taxi companies that are regulated by federal or provincial laws are required to registered period. It should be noted that companies that only provide exempt “taxable goods and services” cannot register for GST/HST. In addition businesses cannot claim input tax credits incurred to produce exempt supplies. For more information on registering for GST/HST please contact your Burlington Chartered Accountant or visit following link http://www.cra-arc.gc.ca/tx/bsnss/tpcs/gst-tps/rgstrng/mndtry-eng.html

Key Dates:

Generally speaking the HST is due to take effect on July 1st 2010, however in certain circumstances HST is required to be reported prior to July 1st 2010.

October 14th 2009: In certain circumstances when goods or services are paid for after October 14th 2009 but provided after July 1st 2010 the purchasers of these services may be required to self-asses the HST.

May 1st 2010: For the majority of Goods and Services paid for after May 1st 2010 and provided after July 1st 2010 the vendor is required to charge and remit the HST. There are limited exceptions to this rule, one of which is pre-paid funeral arrangements.

July 1st 2010: HST is required to be charged on all goods and services that are not exempt services. If your customers are paying for goods or services before July 1st 2010 and receiving the goods or services after July 1st 2010 you should discuss the circumstances and the types of goods and services being provided with you small business accountant such as a chartered accountant.

Angus Shuttleworth Chartered Accountant

Other GST/HST Articles by Angus Shuttleworth

GST/HST – The Quick Method

Total Quarterly Taxable Revenues

Amount of Credit

$0-$15,000

$300

$15,001 – $50,000

2% of taxable revenues

$50,001 – $500,000

$1,000

GST/HST – The Quick Method

Quick Method of Accounting for GST/HST:

The Quick method of calculating GST/HST is an easier faster method than the traditional method, where the GST/HST registrant calculates the GST liability based on a percentage of sales only without having to consider most input tax credits (ITC’s).  The main benefits of the quick method are that it is easier to calculate the tax liability and there are not the same complications caused by ITC’s.   In addition to the easier calculation there may be reduced tax liabilities in situations where you have a relatively high value of taxable supplies (sales) and a low value of inputs (purchases).  Before electing to use the quick method a detailed analysis should be conducted to ensure that it is right for you.

It should be noted that the Quick Method does not preclude you from maintaining records.  You are still required to maintain detailed records of the actual GST/HST charged on taxable supplies (items you sell) and that you paid or owe on your purchases.  The CRA indicated that the records should be maintained for 6 years after the year in which the information relates to.

Possible Eligible registrants:

Provided all the below conditions are met you may qualify to use the quick method:

1)      You have been in business continuously for the last 365 days (year).

2)      You have not revoked you Quick Method election within the last 365 day period

3)      Your aggregate taxable supplies including GST/HST and zero-rated supplies calculated on an associated basis is not more than $200,000 for the first or last 4 consecutive quarters over the last 5 quarter period.

Note: With reference to point number 1 above it is possible to use the Quick Method as a new registrant.  The election just has to be filed by the prescribed time.  Annual filers must elect by the first day of the 2nd quarter and monthly/quarterly filers must elect with their first return.

Exceptions: People who may not use the Quick Method

  1. Accountants or Bookkeepers
  2. Financial consultants
  3. Lawyers
  4. Actuaries
  5. Notaries public
  6. Listed financial institutions
  7. Audit services
  8. Tax return preparation services
  9. Tax consultants
  10. Municipalities or the like
  11. Universities, colleges, schools not operating on a profit basis
  12. Hospital authorities
  13. Charities and non-profit organizations with at least 40% government funding in the year.

Note: There is a special Quick Method for certain non-profit organizations.

Calculating GST/HST under the Quick Method:

  1. Tax to collect: You continue to charge the applicable GST/HST rate on sales, in other words you continue to collect the same percentage of tax as you did prior to electing to use the Quick Method.
  2. Claiming ITC’s. As touched on above most ITC’s are not claimed under the quick method with some exceptions.  Some of these exceptions include purchases and improvements to real property, purchases of capital property, purchases and improvements of eligible capital property. Purchases on which GST/HST became payable before the Quick Method election came into effect
  3. Remittance rates effective January 1st 2008:
Businesses that purchase goods for resale.

Other businesses (i.e. businesses providing services)
Eligible supplies made in a non-participating province sold in a non-participating province 1.8% 3.6%
Eligible supplies made in a participating province though sold in a non-participating province 8.8% 10.5%
Eligible supplies made in a non-participating province sold in a participating province 0% 1.8%
Eligible supplies made in a participating province sold in a participating province 4.4% 8.8%

Note: On the first $30,000 of eligible supplies there is a 1% credit.

If you think your business can take advantage of the Quick Method please read the CRA Guide RC4058 http://www.cra-arc.gc.ca/E/pub/gp/rc4058/README.html

If you need assistance with your GST/HST returns we are here to help you.

Angus Shuttleworth, Chartered Accountant

Other GST/HST articles by Angus Shuttleworth

HST Implementation – Must know