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  • May 19th, 2018 6:52 pm
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Jr. Member
Jun 23, 2010
199 posts
51 upvotes
This sounds more like a PSC, you can disagree but cra has ultimate say. You can argue with them and take it to tax court where you have to pay your own legal fees even if you win.

What a one-sided system!
Jr. Member
Jan 18, 2017
105 posts
83 upvotes
The short answer is you're fine. You have employees and can conduct your affairs independently. You're golden.
______
Canadian & US tax guy
Deal Guru
Aug 2, 2010
14425 posts
4233 upvotes
Here 'n There
crossborderguy wrote:
May 16th, 2018 2:50 pm
The short answer is you're fine. You have employees and can conduct your affairs independently. You're golden.
um, right... (not!)

but then both of our opinions is not worth the paper it's printed on, not to mention that paper is not even involved.

Talk to an accountant.
Jr. Member
Jan 18, 2017
105 posts
83 upvotes
Funny, it's almost as if there were (at least) two people who just might maybe possibly have some sort of letters next to their name who responded to this thread, but I could be wrong...

OP, if you want the long version, here's a helpful link. https://www.canada.ca/content/dam/cra-a ... 10-17e.pdf. The criteria for "Employee vs Contractor" are effectively the same for determining PSB status, and as long as you hit a bunch of those points (a quick review of your first post shows that you do) you're fine. In this context the "5 Employee" thing isn't a thing, nor is the "One employer" thing. As CRA states when they conduct a PSB audit, it's done on a "Case-by-case" basis, and there is a lot of case law that you can reference to see how a taxpayer failed/passed the PSB audit. Set up your affairs accordingly. (Pro-tip: Draft up an employment contract that your clients sign that effectively summarizes everything in the RC4110. Easy way to cover your ass.

In my experience CRA really focuses on two things: Independence, and Ability to Incur a Loss. Because you set your own hours, have your own staff, work at your own office, can contract the work out to other people, use your own equipment, etc, you easily meet the Independence test. As for incurring a loss, you have staff and overhead. If there isn't any work, you don't make money = loss. So you meet that too.

Good luck.




eonibm wrote:
May 16th, 2018 8:09 pm
um, right... (not!)

but then both of our opinions is not worth the paper it's printed on, not to mention that paper is not even involved.

Talk to an accountant.
______
Canadian & US tax guy
Deal Guru
Aug 2, 2010
14425 posts
4233 upvotes
Here 'n There
crossborderguy wrote:
May 18th, 2018 11:43 am
Funny, it's almost as if there were (at least) two people who just might maybe possibly have some sort of letters next to their name who responded to this thread, but I could be wrong...

OP, if you want the long version, here's a helpful link. https://www.canada.ca/content/dam/cra-a ... 10-17e.pdf. The criteria for "Employee vs Contractor" are effectively the same for determining PSB status, and as long as you hit a bunch of those points (a quick review of your first post shows that you do) you're fine. In this context the "5 Employee" thing isn't a thing, nor is the "One employer" thing. As CRA states when they conduct a PSB audit, it's done on a "Case-by-case" basis, and there is a lot of case law that you can reference to see how a taxpayer failed/passed the PSB audit. Set up your affairs accordingly. (Pro-tip: Draft up an employment contract that your clients sign that effectively summarizes everything in the RC4110. Easy way to cover your ass.

In my experience CRA really focuses on two things: Independence, and Ability to Incur a Loss. Because you set your own hours, have your own staff, work at your own office, can contract the work out to other people, use your own equipment, etc, you easily meet the Independence test. As for incurring a loss, you have staff and overhead. If there isn't any work, you don't make money = loss. So you meet that too.

Good luck.
If it were only as cut and dried as you present it...
Newbie
May 22, 2018
4 posts
2 upvotes
Toronto
Sounds like you have a PSB to me. You are essentially an incorporated employee, which is precisely what the legislation intends to label as a PSB.
You can avoid this determination if you have more than 5 employees OR you have more than this 1 client. The moment you have more clients, it will be extremely difficult for the CRA to maintain you are a PSB.
Ultimately, however, you can operate now and claim the SBD, and it is only if the CRA comes knocking that you will have to have enough evidence to prove you are not a PSB. If you cant overcome their presumption, the SBD will be reversed and you will have to pay the regular corporate tax rate of 26% as opposed to the SBD of 13.5% backdated to incorporation.

CRA publication can be found here: https://www.canada.ca/en/revenue-agency ... 893_211410
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