HRTC Timing: Canadians Need To Know
As you may be aware, legislation was introduced on September 18, 2009 to put the Home Renovation Tax Credit into effect. As of this writing, it has passed first reading with two more to go, plus the Senate.
On October 19, 2009, CRA held an information session in Hamilton, Ontario with representatives regarding the HRTC. At issue is when a qualifying expense is actually incurred and if it is deductible if the expense has been incurred but the work has not been completed before February 1, 2010.
The Issue
CRA has not, as of yet, issued a clarification on their interpretation of the proposed legislation but does admit that it is "greyî. There are three interpretations of the proposed legislation at issue:
- A qualifying expenditure will be eligible when a contract is signed, regardless of the installation date, or
- A qualifying expenditure will be eligible when a contract is signed and paid for, regardless of the installation date, or
- A qualifying expenditure will be eligible when paid for and all installation and work is completed before February 1, 2010.
CRA's representative, an auditor from the "underground economyî section, has one suggestion ñ contact your MP so that clarification can be implemented directly into the legislation and avoid the differences of opinion that will ultimately become an issue.
The Mechanics
Putting aside the legalese of the situation, the mechanics of filing and claiming the HRTC is also going to be a challenge, especially for professional tax services who will be under the April 30th time constraints.
A new schedule will be introduced for claiming the home renovation expenses. The draft version of the schedule, a copy of which was provided by the CRA representative, looks much the same as a medical expense schedule, with one notable difference. The GST/HST number of each receipt needs to be input into the return. Any expense claimed that does not have the GST/HST number on the new schedule may trigger a pre/post assessment review. This review could require taxpayers to send in their receipts.
In the meantime, this hugely popular program initiated in the January 2009 Federal budget is now running into trouble for legitimate contractors. The popularity of the program has created sales, helping to stimulate our economy. With these sales also comes the need to complete the work and have installations completed. Some contractors are already booked through January 2010. Do they need to finish on time for the claims to be deductible?
This needs to be clarified as soon as possible. Canadians need to know - no one wants to spend a couple of years working through objections and appeals waiting for the Courts to interpret the legislation.
This needs to be clarified now ñ have the legislation state the intent so that everyone knows where he or she stands and can plan accordingly.
Alan Rowell, DFA, Tax Services Specialist is President of The Accounting Place.
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