Find out what you need to know about HST returns
This information applies to individuals that are currently registered on the HST.
Once you get registered on the HST, there are certain steps that you need to follow to stay compliant. In this post, we are going to cover the basics so you do not get in trouble down the road.
Need to get your HST return prepared?
Download our Business Income spreadsheet here. This is the spreadsheet where you will enter your information and send to us to request our HST return preparation service.
Before anything else, what is the HST?
The HST is a sales tax. In very simple terms, when you charge HST from a client, that HST does not belong to you. It belongs to the government. All you have to do is to keep collecting the HST and submit the total collected during the year to the government in a procedure called HST Return.
Not all the HST collected needs to be sent to the government though. You may be entitled to certain credits, as it will be explained in the next sections.
Who needs to file an HST return
Everyone that is registered on the HST needs to file an HST each year. This applies even if you have not had any revenue in that year. In that case, you will need to file a Nil return, but still, it needs to be filed.
HST effective date
Your HST effective date is the date when you need to start collecting HST from your clients. You are not allowed to collect HST before your effective date and you are required to charge HST after your effective date.
Keep track of your invoices
It is your responsability to deliver an invoice to your client containing your personal information, a date, description of your services, the amount charged for your services, and also the amount of HST that you are charging.
It is also your responsability to keep track of the invoices issued in a orderly manner. Without that, you will not know how much HST you have collected, which is very important to stay compliant.
HST paid on your business expenses
Every time that you pay an elegible expense of your business, you may be paying HST along with it. As long as the expense is elegible and you have proper documentation, you can receive a credit for the HST paid on that expense.
In other words, it works as if you have paid the HST of your business expenses using the HST collected from your customers.
What is an elegible expense?
There is no official list of elegible expenses. In simple terms, any expense that was incurred in order to generate income, can be an elegible expense. It is up to each business owner to make this connection be able to prove that a given expense was directly connected with the business.
This link offers more details on that and also on some exceptions and limitations: https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/sole-proprietorships-partnerships/business-expenses.html
Due date
For most anual filers, the HST return due date is March 31st.
What happens if I don't file my HST return?
If your HST return is not sent on time, you will pay a late fee that can be quite substantial. More details here: https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/gst-hst-businesses/complete-file-penalties-interest.html
On top of that, you will pay interest on the amount owed. The interest charged changes every quarter. More details here: https://www.canada.ca/en/revenue-agency/services/tax/prescribed-interest-rates.html
Always file your HST on time
If the due date is passed and you do not send your HST Return, the CRA can, and probably will, estimate the amount owed and send you a bill including a penalty and interest. If you are in this situation, know that even if you pay the requested amount, the HST return is still required.
The scenario can be even more complicated if you receive the penalty and keep delaying or refusing to file your HST return. These cases can be considered gross negligence and even higher penalties can be applied.
Don't confuse the HST return with your personal Income Tax return
The HST return takes into account only the HST collected in the year (13% in Ontario). The Personal Income Tax is another procedure where you will calculate the personal income tax due. For more information, see here.
Get your HST return prepared by our experienced team
Every year, starting in January, we begin accepting HST returns preparation requests. All you need to do is to enter your information about your business revenues and expenses in our Business Income spreadsheet. Once you have the spreadheet completed, just send it to us by email info@gglraccounting.com
The earlier we receive your request, the better. Our spaces fill up quickly as we approach the deadline by the end of March.