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Did You know?
- Most ‘Bookkeepers’ have little or no formal education
- Most ‘Bookkeepers’ cannot prepare your Corporate Tax Returns and must refer that work to someone else – costing you more money
- Most ‘Bookkeepers’ will charge you by the hour; there is absolutely no incentive for them to complete your work in a timely manner
- Ledgers Professionals are trained and supported by a Team of Accounting, Tax, Finance and Business Professionals with decades of experience.
- Ledgers Canada has strategic alliances and partnerships with complimentary businesses that can also work with you to improve your bottom line.
Small business owners are always trying to save a few dollars, however, be careful where you try to save those dollars!
As the following article indicates, cutting corners on the cost of your accounting and bookkeeping can end up costing you thousands of dollars. This is an excerpt and summary of a recent case from the Tax Court of Canada.
The Appellant was a company called A OK PAYDAY LOANS INC. They were trying to claim a refund of GST paid in the amount of $108,000.
The company was in the financial services sector (payday loans), so therefore they were an ‘Exempt Service’ under the GST Act. As an exempt service, they are not required to charge GST, nor are they entitled to claim Input Tax Credits (ITC’s) for GST they have paid on the purchase of supplies.
On advice from her Accountant, who did not realize that the financial services sector was an Exempt Service, the business owner remitted GST based upon the fees charged to clients; the amount remitted was in excess of $108,000. (Even though they had never charged GST to the clients).
A few years later, when discussing matters with another individual, the business owner realized that they should not have been remitting GST to the government. Confirming this error with CRA, the business owner applied for a refund of the amounts remitted in error. A few months later, after CRA reviewed the case, they returned approximately $18,000 to the company. Upon receipt of this refund, the business owner then proceeded to request a refund of another $90,000 for GST remitted in error for prior periods. CRA quickly denied the refund using section 261 of the Excise Tax Act which states “where a person pays or remits an amount of tax, net tax, penalty or interest that is later found not to be payable or remittable, the person may claim a rebate of that amount. Existing subsection 261(3) provides that an application for the rebate must be filed by the person within four years after the amount was paid or remitted. Subsection 261(3) is amended to reduce the limitation period from four years to two years.”
As the 2 year time limit had long since passed, CRA was correct in their decision to not refund the taxes remitted in error. The business owner, believing that this was unfair treatment by CRA appealed to the Tax Court of Canada.
Upon presentation at the Tax Court and after review of the facts, Justice Miller denied the Appeal as the time constraints had clearly passed. Commenting though on the facts, Justice Miller stated: “It was clear at trial that Ms. Rosene feels she did not receive proper professional advice. She may wish to seek legal advice as to whether the circumstances justify any action in that regard.”
Justice Miller also stated: “I would have hoped that someone at CRA would have clued in that accepting $108,000 over a nine year period from an entity with the name “A Ok Payday Loans”, as GST purportedly collected and remitted from customers of an exempt supply of financial services, was incorrect.”
It is clear in this case that the business owner made a very poor decision when choosing Accountants; a choice that ended up costing her more than $90,000.