Contractor accountant in London, Ontario

The 10% holdback and when revenue turns into cash

Under Ontario’s Construction Act, the owner or the contractor above you keeps back 10% of each payment until the lien period has passed. The work is done and the invoice is issued, so the revenue has been earned, but the money arrives months later. On a big job that holdback can be the whole year’s profit sitting in someone else’s account. The books need a separate holdback receivable, by job, so you can see what is owed and chase its release. HST on a holdback generally becomes payable when the holdback is paid or becomes due, rather than on the original invoice, which is another reason to track it separately. Construction holdbacks explains the accounting.

Progress billing and work in progress

Custom home builders and larger renovation contractors bill in draws: foundation, framing, lock-up, drywall, completion. Each draw is an invoice with HST on it, whether or not the client has paid yet. At year-end, a job that has been worked on but not billed is work in progress and belongs on the balance sheet, and a job billed ahead of the work is a liability. Getting those two right is what makes one year’s profit comparable with the next. Ontario’s prompt payment rules also set timelines for paying proper invoices, which matters when you are both waiting on money and paying subcontractors.

Subcontractors and T5018 slips

A business whose main activity is construction reports payments to subcontractors for construction services on T5018 slips, due six months after the end of the reporting period. You choose a calendar-year or fiscal-year reporting period and stick with it. The simplest way to meet the deadline is to collect each subcontractor’s name, address and business number before the first cheque, not in a rush at filing time. The same review is where worker classification comes up: a helper who works only for you, on your schedule, with your tools, may be an employee in the CRA’s eyes whatever the invoice says. See the T5018 form and the T5018 subcontractor tracker.

WSIB: compulsory, and the clearance you ask for

Coverage with the Workplace Safety and Insurance Board is compulsory for most construction businesses in Ontario, including many independent operators and executive officers who do construction work. General contractors ask each subcontractor for a clearance certificate before paying them, because an uncovered subcontractor’s premiums can become the general contractor’s problem. Keeping your own clearance current, and collecting certificates from everyone you pay, is part of the monthly routine rather than something fixed when a builder refuses to pay. WSIB premiums sit on a separate account from anything the CRA sees.

HST on new homes and renovations

Construction and renovation services carry 13% HST, and the tax you pay on lumber, fixtures and equipment rental comes back as input tax credits. Builders of new homes have more to consider. The sale of a new house is taxable, and new housing rebates change what the buyer pays and how the contract is priced. A builder who rents out a unit it built can trigger self-supply rules that require HST on the unit’s value. Those are questions to settle before the first sale, not after. Your filing period depends on revenue, and many growing contractors move from annual to quarterly filing as the business passes $1.5 million.

Trucks, equipment and the vehicle log

Pickups, trailers, mini-excavators, scaffolding and tools are written off through capital cost allowance from the year they are available for use. A truck used partly for personal driving needs a vehicle log to support the business share, and the CRA asks for it in almost every review of a trades business. Timing a purchase before or after year-end changes the deduction, and trading in an old unit can bring recapture. The conversation belongs before the dealer does the paperwork.

What EverStone handles for you

One CPA and one fixed fee. A typical trades corporation bundle — bookkeeping, payroll and the year-end T2 with statements — usually runs $450–$650 a month. See what it costs.

• Holdback receivable tracked job by job
• Progress billing, WIP and deferred revenue at year-end
• T5018 slips and subcontractor records
• WSIB reporting and clearance checks
• HST returns, including new housing questions
• Crew payroll, remittances and T4s
• T2 corporate return and financial statements for bonding and lenders

Remote contractor accounting from Abbotsford

EverStone is a sole practitioner CPA firm at 32615 South Fraser Way in Abbotsford, serving London, Ontario builders and trades entirely online. There is no London office and no local staff. Meetings run by video or phone at the start or end of the day, invoices and subcontractor paperwork come through a secure upload link from a phone on site, and no one has to leave a job for an appointment.