Entrepreneurship & Small Business

Paying for utilities using a business credit card

  • Last Updated:
  • Dec 17th, 2019 9:13 am
[OP]
Newbie
Jul 18, 2019
4 posts

Paying for utilities using a business credit card

Hello friends,

If I own an incorporated business that is ran from home, I qualify to write off a certain percentage of utilities used for business purposes when filing corporate tax return.

One thing that is not clear is, in the case above, am I allowed to use a business credit card to pay for cellphone, internet, hydro and gas for my place since only a portion of it is used for business?
Would I have to claim the amount that was not deductible on my personal tax return in April as dividend income?

Apologies if this is a dumb question,

Thanks!
2 replies
Deal Fanatic
Sep 23, 2007
5061 posts
1155 upvotes
The credit card would not have a mechanism of preventing the payment from going through, aside from its credit limit. If the utility company accepts credit cards, there is nothing stopping you from paying it. The same way you can use the same credit card to pay for personal expenses. The way CRA controls is by audit and reviews which is always AFTER THE FACT.

You can claim any number you want on your T2. The only problem is that if the expense to sales ratio is not aligned with their expectations, you are much more likely to be selected for audit. If and when selected, the onus falls on you to justify what you claimed. If your utility bill for the year is $3000, CRA will ask why you deduct 100% when your home office space is only 20% of your home? Then you can try to justify whereby they will render a decision to allow or disallow. Some things are quite black and white. I think there's a well defined section for home office expenses which covers utilities. Read the latest version and see what that says.

The other comment is that what your accountant (or you) file as the T2 and what the CRA allow/disallow are 2 separate things. As a small business, your accountant would generally not question the things you say, unless it is glaringly wrong. If your accountant sees flights to Miami, and you say it is business related, he'll save your email and say the details came from client if he needs to cover his ass. Though the better accountants will likely advise you to keep personal and business transactions separate. So suppose your Miami fun cruise expense is booked on the business credit card and the accountant reports it as part of T2. The CRA only sees a bunch of numbers and would not know that the expense contains a Miami cruise. However, if selected for an audit, you will be requested for your credit card statements and receipts showing your purchases. At that point you will have a rough time justifying to the CRA why the expense is business related. An expense like this is likely 100% disallowed. Then CRA adjust your expenses to what it should be, and assess what tax you should have paid, and slap on a heavy penalty.
Deal Expert
User avatar
Aug 2, 2010
15193 posts
4926 upvotes
Here 'n There
You can use any personal or biz credit card or debit card to pay for any personal or biz expense. All that matters is you record it properly on the books, ie paying a personal expense with a biz card and/or a biz expense with a personal card must be recorded on the shareholder loan account or a draw or reflected on a petty cash report submitted to the biz.

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