Contractor accountant in Langford

The year-end covers the T2 with Schedule 1 and Schedule 50, the CCA schedule, the small business deduction, T4 or T5 slips for the owner’s pay, and the instalments for the year ahead.

Building on the Westshore’s slopes

Much of Langford’s new housing sits on rocky, sloped ground around Bear Mountain, Westhills and Happy Valley, and the city centre has filled with mid-rise apartment buildings. Projects like these run in phases. Site work, servicing, framing and finishing can stretch a single contract across two or three fiscal years. That makes work in progress, not the bank balance, the figure that decides each year’s tax.

Work done but not yet billed is earned revenue. Amounts billed ahead of the work are not. A contractor that reports only what it invoiced will show a strong year when progress claims bunch up and a weak one when they do not, and the tax follows the bunching. A work-in-progress schedule at each year-end smooths that out and gives a lender numbers it can read. Construction accounting in BC covers the method.

T5018, if you pay subcontractors

A business whose main activity is construction reports payments to subcontractors on T5018 slips. The return is due six months after the end of the reporting period, and the CRA matches the slips against what each subcontractor reports. On a busy Westshore site the list of payees grows fast: excavators, framers, drywallers, painters, each paid several times a year.

The errors are rarely deliberate. A business number is copied from the wrong invoice, or a supplier who also provides labour is never split out. A sole proprietor is paid under a trade name, or a long-term “subcontractor” is really an employee; see subcontractor or employee. Each is easy to get right when the first payment goes out and awkward in the spring. The free T5018 tracker keeps the details current through the year.

Holdbacks owed and held

BC’s builders lien legislation requires a portion of most construction payments to be held back for a statutory period. A Langford contractor working for a developer is usually owed holdback from above and holding holdback for its own subtrades below. Treating the receivable as ordinary accounts receivable overstates what can be collected now, and leaving out the payable overstates the margin on the very job that created it.

Both distortions land on the balance sheet, and working capital is the figure a surety looks at when setting a bonding limit. If bonding is what limits the size of job you can bid, the holdback schedule is the first place to look. The construction holdbacks guide goes deeper.

PST on the materials you install

In British Columbia a contractor who supplies and installs materials into real property is generally treated as the consumer of those materials. You pay 7% PST when you buy the lumber, fixtures or roofing, and you do not charge PST on the finished contract. That makes PST a cost to build into the bid, not a tax to collect from the customer. It also means PST belongs in job costs, not in a sales-tax receivable.

The rule turns the other way when you sell goods without installing them, or rent out equipment, because those can be taxable sales. A contractor that starts supplying materials to other trades should check its PST registration. The BC PST guide sets out the general rules.

GST on progress claims and new homes

GST on a progress claim is generally payable by reference to the invoice, not to when the money arrives. With holdback held back and payments lagging, the GST remitted can run ahead of the cash collected. Contractors who treat the GST account as a reserve arrive at the filing date short; those who move it aside as they invoice do not.

Builders who sell what they build face a second question. The sale of a new house is generally subject to GST, collected from the buyer. A builder who builds a rental building and rents it out, instead of selling it, is generally treated as having sold it to itself, and must account for GST on its fair market value. Buyers’ agents see the other side of these sales; see realtor accounting in Langford. The self-supply rule surprises Westshore builders who planned to hold units, and it should be priced before the first lease is signed. Input tax credits on the build are recovered through the GST34 return.

WorkSafeBC and the clearance letter

WorkSafeBC coverage is registered, reported and paid separately from CRA source deductions, at a premium rate set by the classification unit for the work. The exposure specific to contracting is that where a subcontractor is not properly covered, the liability can fall back on the prime contractor. A clearance letter obtained before payment settles that question. See WorkSafeBC registration in BC.

Job costing, or a year you cannot explain

A contractor who knows the annual profit but not the margin on each job is guessing at which work to bid next. Costing by job puts labour, materials, subtrades and equipment time against each contract, and it is what shows that one type of work quietly carries another. It has to be set up when the job starts, not reconstructed afterwards. Equipment time belongs in it too, and the equipment CCA classes guide covers how the machines themselves are written off. Bookkeeping in Langford covers the monthly discipline behind it.

Fully virtual, based in Abbotsford

EverStone is a fully virtual, one-CPA firm based in Abbotsford, on the other side of the Strait of Georgia. There is no Langford office and no Island staff. Invoices, subcontractor details and equipment purchases come in by secure upload link or straight from the bank feed, and the year end is reviewed by video. Contractors are the least likely of anyone to want an afternoon off site, which is the practical case for running the engagement online.

Contractors who also want payroll in Langford and corporate tax in Langford can have both quoted together.