During the initial period of Ontario HST, some businesses will have to repay their input tax credits on various items.

Temporarily Restricted ITC Credits – During the initial period of Ontario HST, certain large businesses with annual taxable sales over $10million and financial institutions will be required to recapture (repay) their input tax credits on certain items which include:

• Road vehicles less than 3 tonnes, include parts, service and fuel
• Energy (electricity, gas, fuel and steam) except in manufacturing and production activities
• Tele-Communications except internet and toll free numbers
• Food, beverage and entertainment subject to 50% restriction

These restrictions do not apply for goods acquired for resupply (ie. car dealerships are not restricted by the road vehicle rule for inventory)

The recapture is temporary and will be phased out as follows

• 100% ITC recapture from July 1, 2010 to June 30, 2015
• 75% ITC recapture from July 1, 2015 to June 30, 2016
• 50% ITC recapture from July 1, 2016 to June 30, 2017
• 25% ITC recapture from July 1, 2017 to June 30, 2018
• No recapture thereafter

Registrants should ensure that their accounting records reflect these restrictions at July 1st.