Tip on Pre-HST Billings

"The HST transition rules provide that if services are commenced prior to July 1, 2010 and continue after July 1, 2010, the supplier will be required to allocate between the pre-HST period and post-HST period and not charge HST on the pre-HST period and charge HST on the post-HST period. An allocation is required (except if 90% or more of the services are provided prior to July 1, 2010).

"Suppliers need to maintain evidence to provide to Canada Revenue Agency auditors.  While it is incorrect to say that all auditors are difficult idiots, I often tell clients to assume that such an auditor will show up on their doorstep in the future to conduct an audit.  What evidence and documentation are you going to have to prove your point to the auditor?  With respect to not charging HST on pre-July 1, 2010 supplies of services, what evidence are you going to be able to present?

"Good documentation will include docket entries, time sheets, employee punch cards, etc.  What will also be helpful are invoices issued in June 2010 billing the client for pre-July 1, 2010 services that have been performed.  I often refer to this as "blowing out your WIP (work in progress).  If you issue a bill and it is recorded in your computer system prior to July 1, 2010, it must be that the the services recorded as being provided before July 1, 2010 were actually provided. Note that if you are billing in May/June 2010 for services to be rendered on or after July 1, 2010, HST will be applicable.

"I have one caveat that I have to highlight - you need to ask whether it is likely your client will pay the invoice. If a supplier issues an invoice prior to July 1, 2010 and must charge GST (that is, the supply is not zero-rated or exempt), the supplier will be required to remit the GST to the Receiver General of Canada with the GST/HST return for the reporting period in which the invoice is issued (e.g., June 2010).  If the recipient does not pay the GST by the GST/HST return filing deadline, the supplier still must remit the GST.  As a result, there can be a cash flow issue.

"If a supplier cannot issue an invoice, we are recommending a "WIP freeze".  This means that the supplier would generate a document that would evidence the pre-July 1, 2010 work in progress.  Depending on the circumstances, the document may evidence the number of hours worked and/or the value of the services rendered prior to July 1, 2010.  The document will need to be supported by some verifiable data (e.g. a date stamped printout of computerized records). The method must be able to withstand scrutiny and be reasonable in the circumstances.  What is communicated (and the words used) may be important as auditors assessment radar is often triggered by the words taxpayers use."

- Great advice!

B.C. anti-HST campaign on verge of victory

" Things have not gone well for the BC Liberal party since the end of an Olympic Games that Premier Gordon Campbell had hoped would restore some support. On February 4, British Columbia’s Chief Electoral Officer Harry Neufeld approved a petition initiative spearheaded by former Premier Bill Vander Zalm to derail the HST, giving the Fight HST group 90 days from April 6 to collect signatures from 10 per cent of voters in each of the 85 electoral ridings.

"By the end of April, only three weeks into the petition campaign, 300,000 registered voters had already signed the initiative to kill the HST. By May 11, that figure had ballooned to 400,000 signatures. And now, according to the Fight HST website, with fully seven weeks to go in a 13-week campaign, organizers say they have reached the half-million mark.

"This figure, organizers report, represents success in 72 of the 85 ridings that have reached the minimum 10% threshold from Elections BC, with 51 of those ridings sitting at 15% or more. Clearly it would seem that the first stage of the initiative is slated to succeed."

- Impressive. 

- Nothing really new here.  HST is basically GST at 12% where the province keeps 7% and the federal government keeps 5%. 

Not to seem jaded but the problem with instant rebates (noted under the rebates section of the website) is that they can be revoked at a future point when BC residents have accepted the existence of HST in their daily lives.

As well, although there will be a HST credit for low income individuals in BC, BC residents can expect their overall personal tax burden to increase, as the provincial portion of HST to exceed the outgoing PST in so much as to what the new HST tax is charged on.  

HST TRANSITION RULES THAT TAKE EFFECT MAY 1ST.

The transition rules that take effect May 1, 2010 are intended to avoid both PST and (provincial portion of) HST being charged on the same payment for goods and services.  In other words, to prevent the consumer from being charged 7% PST and 12% HST. 

The core of HST transition rules is based on "transfer of ownership". 

When goods or services are transferred and an invoice is submitted, there is a transfer of ownership.   If an immediate transfer of ownership does not occur and, in fact, occurs over time (a lease, building construction, prepayment for goods) there needs to be transition rules to prevent confusion and ensure consistency.

May 1st transition rule:

Consumers purchasing goods and services that will be provided on or after July 1, 2010, or entering into leases on or after July 1, 2010, will start seeing HST on their invoices or bills for these as of May 1, 2010. 

In other words, as of May 1st, if you sign up for a lease or agree to purchase goods or services and the agreement doesn't begin or the goods aren't delivered until July 1, 2010, your agreement still has to be based on HST. This makes sense as it not only prevents double taxation (confusion as to what to charge when the goods finally arrive) but it prevents tax avoidance (people purposely purchasing goods and services but delaying delivery and payment). 

www.sbr.gov.bc.ca/documents_library/notices/HST_Notice_001.pdf

www.cra-arc.gc.ca/tx/pstr/trnstnl/menu-eng.html

Property Tax Deferral For Young Families A Good Idea? 

"One of the big announcements was the new property tax deferral program for families with children living under the age of 18. They were hoping to implement this as soon as June 2010. The provincial government was hoping that families would utilize this if one parent lost a job temporarily, or families will use the extra money they saved from having to pay property taxes to pay off their car loans or credit card debt instead.

Colin Hansen says in his budget to The Speaker:

The point is, it’s their choice. The option is available to help them enhance their quality of life in whatever way they choose.

So you might be instantly thinking “Score! Time to make me some babies! I’m all for enhancing my quality of life!”

But note the key word, DEFERRAL."

- the housing bubble in the US was created by low interest rates and a lack of oversight.  When people are allowed to defer debt, very few plan for paying the future liability deferred.  A common "trick" by big box stores is the deferral of debt (6 months, 12 months etc) where interest accrues and is only payable *if* the individual does not pay the full amount by the end of the deferral period.  In a majority of cases, people do not plan for the liability deferred and are burdened with the additional interest cost.  I would suspect this would be no different.