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