Accounting for Engineers and Architects in BC
Engineering and architecture firms sell hours against projects that run for months. Profit depends on how well you track work in progress, bill milestones, manage subconsultants and keep a reserve for the gaps between contracts.
EverStone CPA handles bookkeeping, project reporting and corporate tax for design and engineering practices anywhere in British Columbia, online and at fixed written fees.
Quick answer: Most engineers and architects who run their own practice incorporate once fees exceed what they live on, within the limits your regulator sets for firms and corporations. The accounting priorities are project-level job costing, unbilled work in progress, subconsultant payments and a planned owner draw. EverStone does that work for BC firms of one to a few dozen people.
Firms we work with
Our clients in this field include structural, civil, mechanical, electrical and geotechnical engineers, architects and building designers. Some work alone from home; others run studios with project managers, drafters and technologists.
Many have a few large clients, such as developers, contractors or public bodies. That concentration shapes cash flow, contract risk and, for solo consultants, the personal services business question.
- Solo engineers and architects consulting under their own company
- Small studios with drafters, technologists and project staff
- Firms working mainly for developers, builders or public owners
- Partnerships of two or three principals sharing a practice
- Engineers doing inspection, review and certification work
- Practices developing their own software or design methods
Sole practice, partnership or corporation
Design professionals can practise alone, in a partnership or through a company. The tax result differs, and so do the obligations to your regulator.
Sole practice
Fees and costs go on a T2125 in your personal return. It suits a new practice or a side practice beside employment, and keeps the filing simple.
Partnership of principals
Each partner reports a share of profit. A partnership return may be required, and the agreement should spell out draws, capital and what happens when someone leaves.
Professional corporation
Profit kept in the company is taxed at 11% combined on the first $500,000 of active business income. Personal tax is paid only on what you withdraw.
What the regulator requires
Firm permits, corporate naming and who may hold shares depend on your regulator’s rules for engineering or architecture practices. Check them before incorporating, and we will set up the tax side to match.
See sole proprietor vs partnership, the partnership return and whether you should incorporate.
Drawing pay as a principal
Project fees arrive unevenly, so principals benefit from a steady monthly draw set against a planned year, then trued up at year-end.
Monthly salary
A regular salary through payroll smooths your personal cash flow, creates RRSP room and reports on a T4. It is deductible to the firm.
Year-end dividends or bonus
Once the year’s profit is known, a dividend or bonus settles the balance. A bonus is deductible; a dividend is paid from after-tax profit.
More than one principal
Where two or three principals own shares, a shareholders’ agreement should set out how pay and dividends are decided, especially when workloads differ.
Use the salary vs dividends calculator and read about bonus vs dividend at year-end.
GST and PST on engineering and design fees
Engineering and architectural fees are generally subject to GST once you are registered. Registration is required once taxable sales pass $30,000 in four consecutive calendar quarters.
Registering and filing
Most small firms file GST annually, since annual filing is available up to $1.5M of taxable sales. Quarterly applies above that, to $6M. Many firms choose to register early so they can recover GST on their own costs.
BC PST
BC PST is a separate registration and return. Whether it applies depends on what else you sell, such as software, plotted drawings or equipment. We check your mix before you invoice.
Clients outside BC
Projects in other provinces or outside Canada can change which sales tax applies to your fees. The place of supply rules decide it.
See our GST filing services, the place of supply guide and the registration guide.
Staff, subconsultants and T4A slips
A design firm often mixes employees with subconsultants for specialties it does not keep in-house, like geotechnical, energy modelling or rendering.
Employees
Drafters, technologists and project staff are on payroll. Remit source deductions, pay 4% vacation, rising to 6% after five years, and issue T4s by the end of February.
Subconsultants
Specialists who run their own business and work for other firms are usually contractors. Keep a written agreement, their GST number and their insurance on file.
Construction-related reporting
If construction is your firm’s main business, T5018 reporting of subcontractor payments may apply, due six months after the reporting period. We confirm whether it applies to you.
WorkSafeBC
Register once you employ staff and pay premiums on their wages. Contractors may ask for your clearance letter, and you should collect theirs.
Our payroll services cover staff, and the employee vs contractor guide explains the line.
Job costing, work in progress and billing
A firm can be busy and still lose money on its largest projects. Project-level books show where hours went over fee.
Time against projects
Every hour from your time-tracking or project software is tied to a job and a phase. We reconcile those reports to payroll so the cost of each project is real.
Unbilled work
Hours worked but not yet invoiced are an asset at year-end. Recording work in progress properly changes reported profit, especially on large fixed-fee jobs.
Retainers and holdbacks
Retainers are held until earned. On some construction-related contracts, part of each invoice is held back until completion; we track it as a receivable, not lost revenue.
See management reporting and our monthly bookkeeping services. Construction accounting in BC covers the builder side of the same projects.
Software, survey gear, vehicles and CCA
Design software subscriptions are ordinary expenses. Workstations, plotters, survey instruments, drones and site vehicles are capital assets written off through CCA.
Computers and plotters
High-end workstations and large-format plotters go into their CCA class in the year they are ready for use. Timing a purchase before year-end can bring the deduction forward.
Site vehicles
Vehicles used for site visits are deductible by business use. A simple log of trips to project sites supports the claim.
Office or home studio
A leased studio is rent. A home office used regularly for the practice can be claimed, with a different method for an incorporated firm.
See CCA classes and the home-office deduction for corporations.
Insurance, SR&ED and other issues for design firms
A few points come up repeatedly with engineering and architecture clients.
- Professional liability insurance and regulator dues are deductible practice costs
- Developing new design methods or tools may qualify for SR&ED, claimed on Form T661
- A solo engineer working for one client full-time should check personal services business risk
- Reimbursed project expenses, like prints or travel, are billed at cost and tracked separately
- Fixed-fee bids need a cost history so future quotes cover the real hours
- Shareholder loans not repaid within one year after year-end are generally taxed as income
Read about personal services business risk and SR&ED expenditure limits. Our page for IT consultants covers the solo contractor case more fully.
Year-end checklist for an engineering or design firm
Work through this in the last month of your fiscal year. Your T2 is due six months after year-end, but any balance owing is due earlier.
- List unbilled hours. Work done but not invoiced on each open project, at cost.
- Review receivables. Chase overdue invoices and identify holdbacks still owed.
- Clear retainers. Confirm which retainers are earned and which are still held.
- Collect subconsultant records. Agreements, GST numbers and totals paid this year.
- List new equipment. Workstations, instruments and vehicles, with purchase dates.
- Plan principal pay. Decide the salary, bonus and dividend mix before year-end.
See the year-end document checklist and our corporate T2 service.
Services and fees for engineers and architects
Design firms pay the same published fees as other EverStone clients.
- Self-employed return with a T2125: commonly $250–$450
- Monthly bookkeeping with GST and PST filing included: from $300 a month
- Corporate T2 and statements: quoted after a free consultation
- Payroll for staff and principals: quoted with the bookkeeping
- Fractional controller with project reporting: from $1,500 a month
- Advice Call on structure or a partnership: $200 + GST
Every engagement is fixed in writing first. See our pricing page.
Questions from engineers and architects
Can I practise engineering or architecture through a corporation?+
Why does work in progress matter for tax?+
Most of my work comes from one firm. Is that a problem?+
Should I charge GST on fees passed through from subconsultants?+
Do you work with firms outside Metro Vancouver?+
Written and reviewed by a Chartered Professional Accountant at EverStone CPA, an Abbotsford CPA firm working remotely with businesses across British Columbia. Updated . You can read client reviews before you get in touch. See our editorial standards.
Related reading
Reading for project-based professional firms.
Send an enquiry
Tell us about the firm: how many principals and staff, how you track time, and whether you are incorporated. A Chartered Professional Accountant replies within one business day with next steps and a written fee.