March 13, 2019
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Penalty for not providing T5018 slips to subcontractors

The Contract Payment Reporting System targets the underground economy by requiring construction contractors (anyone who derives their income primarily from “construction activities”) to report to the CRA all payments to subcontractors (of at least $500 services per year per subcontractor), along with the subcontractor’s Business Number or Social Insurance Number. This is done either on Form T5018 slips (given to each subcontractor), or line-by-line on a T5018 summary. These rules are found in section 238 of the Income Tax Regulations

In Apex City Homes Limited Partnership v. The Queen, 2018 TCC 247, Apex was a partnership, in the business of developing and selling residential condominiums in Calgary. Apex hired a general contractor to handle all the construction. The general contractor hired all the subcontractors.

The CRA assessed Apex for not filing a T5018 reporting its payments to the general contractor. Apex appealed to the Tax Court of Canada.

The Court ruled that Apex derived its income from “construction activities” and was required to file the T5018. It was thus subject to a $2,500 penalty for not filing the form, for each of the three years for which it was assessed.

Businesses engaged in construction, even those that leave all the actual construction work to a contractor, need to be aware of this obligation!

This letter summarizes recent tax developments and tax planning opportunities from a third-party affiliate; however, we recommend that you consult with an expert before embarking on any of the suggestions contained in this blog post, which are appropriate to your own specific requirements. Please feel free to get in touch with Lee & Sharpe to discuss anything detailed above, we would be pleased to help.
Sandy J. Lee

Hello my name is Sandy Lee, I am a partner at Lee & Sharpe.

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