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Worth knowing
A running set of points that come up often, cost people money when they are missed, and are straightforward once somebody explains them. Mostly aimed at Ontario corporations and small businesses. Added to as things come up.
The ordinary way of doing HST is to charge it, track the HST you pay on purchases, and remit the difference. The Quick Method replaces that with a simpler calculation: you remit a reduced percentage of your HST-included sales and stop tracking input tax credits on your ordinary operating costs.
For a business with high revenue and low taxable expenses, particularly service businesses with few purchases, the reduced rate often keeps more than the input tax credits would have. There is also a credit on the first tranche of eligible supplies each year, which sweetens it further.
Who cannot use it. The list of excluded businesses is broad and specific: accountants, bookkeepers, lawyers, notaries, actuaries, financial consultants, tax consultants and tax return preparers, along with listed financial institutions. So no, my own firm cannot use it either.
The conditions. Worldwide taxable supplies, HST included, must be within the threshold across the previous four consecutive quarters, and you generally need to have been registered for at least a year. It is an election, so it has to be filed rather than assumed.
Worth modelling on your own numbers rather than taking as a rule. For a business with substantial taxable purchases, the regular method usually wins.
Two quite different systems get confused with each other, and which one applies depends on whether you are incorporated.
If you are a corporation, the company can pay you a per kilometre allowance at the prescribed rates for business driving in your own vehicle. The allowance is deductible to the company and tax free to you, provided the rate is reasonable and it is based on kilometres rather than a flat monthly amount. This is often simpler and better than the alternative. The rates are set each year and published by the CRA: automobile and motor vehicle allowances.
If you are self-employed, that route is not open to you. You cannot pay yourself an allowance, so the claim is based on actual costs, fuel, insurance, repairs, licensing and capital cost allowance, apportioned by business use.
In both cases the business use percentage has to come from somewhere, and the only thing that survives a review is a logbook. Date, destination, purpose, kilometres. A full year's log establishes a base, and there is a simplified approach afterwards for those who keep one properly.
The part people miss. Where a corporation pays a per kilometre allowance, it can generally claim an input tax credit on that allowance, calculated as the tax fraction of the amount paid. The allowance is treated as though HST were embedded in it. So the mileage route is not just simpler, it recovers HST as well.
Be consistent. You settle on the approach that fits your situation and stay with it, changing when your circumstances change rather than because the other method would have produced a better number this year. Recalculating both each year and taking whichever wins is not how it is meant to work.
A self-employed person claims a share of home costs directly against business income. A corporation cannot simply deduct part of your house, because it is your house and not the company's.
Two routes exist. The corporation can pay you rent for the space, which is deductible to the company and taxable to you, and carries implications for your home that are worth thinking through before you start. Or you claim employment expenses as an employee of your own corporation, which requires the company to sign a T2200 declaring that you are required to maintain a workspace.
The second route is the usual one and it is frequently overlooked entirely, because owners assume a corporation works the same way a proprietorship does.
A corporation can accrue a bonus at year end and deduct it in that year while paying it in the next, which is a genuinely useful tool for moving income between years and managing the small business limit.
The condition is that the bonus must be paid within 180 days of the corporation's year end. Miss that window and the deduction is denied in the year accrued and pushed into the year it is eventually paid, which is usually the opposite of what the accrual was for.
It is a hard deadline, it is easy to lose track of, and the source deductions have to go with it. Put it in the calendar the day the year end closes.
Meals and entertainment are generally half deductible. There is an exception for special events where food, beverages or entertainment are generally available to all employees at a particular place of business, and those are fully deductible.
The limit is six such events in a calendar year, per place of business. A Christmas party split across two nights because everyone will not fit in the room counts as one event rather than two.
Taking one employee to lunch does not qualify, and neither does a client dinner. The point of the exception is events for the whole workplace.
Life insurance premiums are ordinarily not deductible. There is an exception where the policy has been assigned to a lender as collateral for a loan used to earn income, and the lender required it as a condition of the financing.
The deduction is limited, broadly to the net cost of pure insurance for the part of the policy actually required as security, rather than the whole premium. It is an easy one to have in place without realizing it is claimable, since the policy is usually arranged with the lender rather than alongside the accounting.
If you took out a loan and the bank wanted insurance assigned to it, mention it.
Where a corporation owns a life insurance policy on a shareholder or key person, the structure has to be right or the main benefit is lost. This one goes wrong quietly and stays wrong for years.
The corporation should generally be the named beneficiary. Not the spouse, not the children, not the shareholder personally. The reason is what happens next.
When the corporation receives the death benefit it is not taxable to the company, and an amount broadly equal to the proceeds less the policy's adjusted cost basis is credited to the corporation's capital dividend account. That balance can then be paid out to shareholders as a capital dividend, free of tax in their hands. The result is that the insurance money reaches the family without being taxed on the way through.
Name someone other than the corporation as beneficiary while the corporation keeps paying the premiums and three things follow, none of them good. The premiums are still not deductible. There is no capital dividend account credit, because the corporation never received the proceeds. And the CRA may treat the premiums as a shareholder benefit, taxable to the shareholder personally each year.
Two further points worth knowing:
Corporate insurance is commonly used to fund a buy-sell agreement between shareholders, or to cover the tax that arises on the deemed disposition of shares at death. Both are sensible, and both depend on the ownership, the beneficiary and the shareholders' agreement pointing in the same direction. That is a conversation involving your insurance advisor, your lawyer and me together, rather than any one of us alone.
The lifetime capital gains exemption can shelter a large gain on the sale of your company's shares, and it is the single biggest number available to most owner-managed businesses. It is also conditional, and one of the conditions looks back over the 24 months before the sale.
What can put you offside is what the company is holding. Surplus cash, investments, or property not used in the business can all count against you. Tidying that up is called purification, and doing it the month before closing can be too late because of that two year look-back.
The useful version of this tip is short: if selling is even a possibility within a few years, raise it now rather than when there is an offer on the table. The same is true of an estate freeze, which fixes today's value in your hands and passes future growth on. See tax planning.
These are general points as at August 2026, not advice for your situation. Rates, thresholds and prescribed amounts change annually, and several of these have technical conditions beyond what is set out here. Worth a conversation before acting on any of them.
Most of these take five minutes to check and can be worth a good deal more than that. Twenty minutes, no charge.
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