Archives for November 2010

Eligibility for the Disability Tax Credit and Registered Disability Savings Plan

On November 25th, 2010 the Honourable Jim Flaherty, Minister of Finance made the following statement,

“The Tax Court of Canada has recently held that existing income tax law would not allow an individual to appeal a determination concerning an individual’s eligibility for the Disability Tax Credit unless that determination affected the individual’s tax payable. As a result, individuals whose income is too low to pay tax are effectively barred from establishing an RDSP where their eligibility for the Disability Tax Credit has not been accepted by the Canada Revenue Agency. 

“Procedural issues of this nature should not be an impediment for individuals who wish to establish their right to the Disability Tax Credit and, as a result, also their right to open an RDSP. 

“To promote the fair and equitable treatment of Canadians, I intend to introduce legislative amendments at the earliest opportunity so that individuals can, in every case, appeal a determination concerning their eligibility for the Disability Tax Credit.”

It’s Harsh and Unfair but it’s the Law

Validating Supplier HST Registration Numbers

The outcome of a recent court case involving Computronic Computer Inc. [Comtronic Computer Inc. v. The Queen (2010 TCC 55)] serves as an important reminder that businesses should always validate the GST/ HST registration numbers of their suppliers in order  to prevent the disallowance of ITCs or input tax refunds based on invalid registration numbers.

 Computronic operated a wholesale computer parts and computer assembly business.  The invoices from the suppliers had valid GST numbers, but the numbers belonged to third parties that did not appear on the invoice.  The Tax Court of Canada was compelled to follow the strict position taken by the Federal Court of Appeal in another case [Systematix Technology Consultants Inc. v. Canada (2007 FCA 226)] with the result that it disallowed the input tax credit even though the purchaser paid the GST in good faith.

Section 164 of the Excise Tax Act requires a purchaser to substantiate its input tax credit (ITC) claim by obtaining from the suppler the information prescribed in the Input Tax Credit Information (HST/GST) Regulations, including the name of the supplier and the GST registration number assigned to it.

 Clearly this is a harsh and unfair application of the law.  Nevertheless, it is the law.

 The upshot of all this is that businesses need to establish procedures to manage the risk related to GST/HST.  The registration numbers of  suppliers need to be verified when set up and on an ongoing basis.  Supplier invoices with GST/HST over a certain dollar figure should be verified on an individual basis.

CRA has set up an on-line GST/HST Registry  where business can validate the GST/HST number of a suppliers:

 [This information is from the September 2010 edition of  “Tax Matters @EY’  and from the July 2010 edition of  “Tax for the Owner -Manager”  Volume 10, Number 3 published by the Canadian Tax Foundation.]

Taxing the HST transition support payment for small business

Another sign that the government gives with one hand and takes with the other

I read the following at

A number of readers of the HST Blog have asked whether the Ontario HST Transition Support Payment for Small Businesses is subject to income tax. The answer is “yes” – sorry to be the bearer of bad news.  I was informed a number of months ago by a representative of the federal Department of Finance that the payment is subject to income tax and that the Ontario negotiators were/are aware of this interpretation.

So, please make sure that you make a record of the payment for 2010 income tax calculation purposes.  The reality is that th tax authorities will know about the payment to you – so, please do not forget it (even if it is really small).

Canada Pension Plan 2011

Canada Revenue Agency announces maximum pensionable earnings for 2011

The maximum pensionable earnings under the Canada Pension Plan (CPP) for 2011 will be $48,300—up from $47,200 in 2010. 

Contributors who earn more than $48,300 in 2011 are not required or permitted to make additional contributions to the CPP.

The basic exemption amount for 2011 remains $3,500. Individuals who earn less than that amount do not have to contribute to the CPP.

The employee and employer contribution rates for 2011 will remain unchanged at 4.95%, and the self-employed contribution rate will remain unchanged at 9.9%.

The maximum employer and employee contribution to the plan for 2011 will be $2,217.60, and the maximum self‑employed contribution will be $4,435.20. The maximums in 2010 were $2,163.15 and $4,326.30.

Attention Shoppers – For a Limited Time … Computers – 100% Write off

The CCA rate for computer equipment (including systems software) acquired after January 27, 2009, and before February 2011 was increased from 55% to 100% with no half-year rule. As a result, a full write-off can be claimed in the first tax year that CCA deductions are available.

To be eligible, the computer equipment purchased must be new and situated in Canada, and it must be used in a business carried on in Canada or used to earn income from property situated in Canada.

For more information on this and other tax relief measures go to