If you have any questions about HST or would like to know how HST will affect your situation, please contact your RLB advisor.

Q&A for this week:

Q: Regarding the May 1st rules, do I have to actually pay the amount before May 1st to avoid having the HST included for a service that will be performed after July 1st? What if I’m invoiced the amount but don’t pay until after May 1st.

A: The transitional rules generally operate on the basis of the earlier of when an amount becomes due or paid. So if the amount is invoiced and due before May 1st but isn’t actually paid the invoice should not include HST.

Q: For the purpose of the Ontario ITC recapture rules, my business isn’t currently over the $10m of annual sales but expectations are that it will be in the next year. At what point does the ITC recapture rule apply?

A: A taxpayer is subject to the recapture of input tax credits for a particular recapture period where the taxpayer’s annual income (including income from all associated companies) for their fiscal year immediately preceding the recapture period is greater than $10million.

The recapture periods are July to June. So if the company has a Dec. 31st year end and doesn’t expect to be over the $10m in 2010 but expects to be over for the Dec. 31, 2011 period, then the ITC recapture of specific expenses begins July 1, 2012.

Q: My business is a GST registrant and I need to make some significant purchases of office equipment soon. Should I try and wait until July 1st? What if I can’t wait?

A: If the purchase can be delayed, it would be better for GST registrants to wait until after July 1st to purchase capital items which will be subject to RST. The 13% HST would all be entitled to a refundable input tax credit. Buying before July 1st would result in a 5% refundable ITC and 8% Retail Sales Tax which is not refundable.

If a purchase can’t wait, consider leasing the property from the vendor until July 1st. This may result in an additional charge of a lease but the savings may be worth it.