Calculating GST/HST can be an onerous task for many small business owners. The quick method of accounting is an option available to many small businesses that simplifies the GST/HST calculation, reduces paperwork, and makes it easier to file GST/HST returns.
How does it work?
With the quick method, you are still required to collect GST/HST at the relevant rates, but a fixed rate is used to calculate the amount you need to remit to CRA. The specific rate (or rates) will generally depend on your business type (i.e. businesses that purchase goods for resale versus service and other businesses) and the province where your company is located.
Quick method remittance rates are less than the GST/HST rates that you charge, so you only remit a portion of the tax that you collect. For example, a qualifying business in Ontario that provides services may collect HST at 13%, but remit the tax at a rate of 8.8%. Additionally, businesses who utilize the quick method also qualify for an annual credit of 1% on the first $30,000 of eligible taxable supplies (including GST/HST). In short, using the quick method could result in tax savings.
Note that under the quick method, you can’t claim most input tax credits (ITCs) – the GST/HST paid on purchases. The difference between the GST/HST collected and the fixed remittance rate is intended to account for the estimated ITCs you would have otherwise claimed on your GST/HST return. So if your business has a lot of expenses that provide ITCs, the quick method may not be a good option for you.
Am I eligible?
You must formally elect to use the quick method of accounting for GST/HST reporting purposes and not all businesses are eligible. In order to qualify, your taxable supplies (including GST/HST) can’t exceed $400,000 for four consecutive quarters within a five-quarter period. There are also certain professionals and industries that are excluded from using the quick method.
The tax and accounting professionals at S+C Partners would be happy to speak with you and review your specific circumstances to determine if the quick method of accounting for GST/HST is an appropriate option for your business.