Finance & Internal Audit Committee Workshop To Tax or Not to Tax E&E Project

Transcription

1 Finance & Internal Audit Committee Workshop To Tax or Not to Tax E&E Project Michael Matthews, Partner Annie Gosselin, Senior Manager February 26, 2015

2 Opening Comments Effectiveness and Efficiency (E&E) Projects The Ministry of Education has provided the Council of Senior Business Officers (COSBO) funding since 2006 to identify projects that would result in costs savings, cost containment and assist the sector to operate more effectively and efficiently. The E & E Advisory Committee has approved an extensive portfolio of projects, including: Attendance Management Research Broadband Connectivity Research Employee Benefits Research Green Schools Research E-Funds for Cashless Schools Professional Development Program in School Board Operations Transportation Contracting practices Transportation Legal Entity Reference Guide Asset Management Workshop 2

3 Opening Comments Effectiveness and Efficiency (E&E) Projects The E & E Advisory Committee has approved an extensive portfolio of projects, including: Shared Services Feasibility Study of Eastern Ontario School Boards BPS Procurement Directive Training Modules BPS Expenses Directive Implementation Guide GST/HST Procedure Manual Audit Training Shared Services IT Project with ECNO (in progress) The ministry has provided project management leadership and support for E&E projects. For more information please see 3

4 Opening Comments GST/HST Procedure Manual Project Application for E&E Project in early 2014: Following CRA audits of school board transactions Need for additional advice on Partial Rebates Support appropriate and consistent understanding and application of HST legislation across the province, mitigating the risk of penalties for noncompliance. Project Deliverable Topics include GST/HST registration, small supplier divisions and partial rebates. As an accessible reference tool, the manual also provides quick overview tables on the proper treatment of supplies and exemptions. 4

5 Contents Key elements GST/HST registration Division number Small supplier division Reporting Supplies made by school boards Extra-Curricular and student activities Student services Sale of goods to students School cafeteria meals Sale of capital property Fundraising activities 5

6 Contents Real Property Lease Sale 211 election ITC vs PSB rebate General rule New CRA policy Documentation requirements Questions 6

7 Key Elements Who is the vendor? School Board Registered School Division number Own GST/HST return On behalf of school board School board s GST/HST number on invoices School board s GST/HST return 7

8 Key Elements Who is the vendor? Small Supplier School No GST/HST return On behalf of school board School board s GST/HST number on invoices School board s GST/HST return 8

9 Key Elements Who is the purchaser? School Board Purchases made by (1) the school board or (2) a school using the school board s funds ITC and PSB rebate School board Registered School Purchases made by (1) the school itself or (2) the school board charging the school budget ITC and PSB rebate School Small supplier school Purchases made by the small supplier school or by a school board charging the school budget No ITC PSB rebate School board 9

10 GST/HST registration Division Division number Registered school Separate GST/HST return Separate PSB claim Small supplier division Taxable supplies of $50,000 or less Separate books, records, and accounting systems Separate location or activities, and Within the past year, no designation revoked Unregistered school = No GST/HST to collect = No ITC = No GST/HST return PSB rebate claimed by school board 10

11 GST/HST registration Reporting Periods Threshold amount (Taxable supplies) Reporting period options available $1,500,000 or less Annual, quarterly, or monthly More than $1,500,000 but not more than $6,000,000 More than $6,000,000 Quarterly or Monthly Monthly 11

12 Supplies made by school boards Extra-Curricular and student activities Exemptions Food, beverages, services or admissions during extra-curricular activities Admission fees to a school dance. Pizza/Hotdog/Hot Lunches Days. Nutrition program offered to students. Class trip. Admission to amateur performances and events Student fees related to registration Council fees, athletic and recreation fees, club fees, etc. 12

13 Supplies made by school boards Student services Services performed by a student or by an instructor in the ordinary course of the instruction exempt. Haircuts provided as part of a hair-styling class The supply of any hair products by the school is taxable, except if sold at direct cost. Carpentry services provided as part of a carpentry class. Oil changes and other mechanical services provided as part of a mechanical class. The supply of any mechanical pieces/material for which a separate fee is charged is taxable if sold at more than direct cost. 13

14 Supplies made by school boards Sale of goods to students General rules Sales of goods for less than direct cost Exempt Sales of goods for more than direct cost Taxable Sales of donated goods Exempt Sales of goods in a fund-raising activity Exempt Rentals of goods Exempt 14

15 Supplies made by school boards Sale of goods to students Examples School Spirit Wear Team Sport/Club Clothing Up stander T-Shirts Rings Students Agenda s and Planners Leases of tools, music instruments, lockers, etc. are exempt. Sale of donated artwork is exempt. Sales of Christmas cards, oranges, grapefruits, calendars, etc., as a fundraising activity (non-recurring activities). 15

16 Supplies made by school boards School cafeteria meals General rules Food, Meals or Beverages Sold in an elementary or secondary school cafeteria primarily to students Exempt Sold or given to relieve poverty, suffering or distress of students Exempt Sold for a private party, reception, meeting or similar private event Sold through a vending machine Taxable Taxable 16

17 Supplies made by school boards School cafeteria meals Examples A caterer serves lunches to students, then the fees paid by the school to the caterer is exempt where the meal is provided in the cafeteria. The definition of cafeteria is broad enough to include a class room, gymnasium or any location where students can have lunch. Breakfast program is exempt If a caterer serves lunch to staff during a staff meeting or to parents during a parents council night event then the fees paid by the school to the caterer is taxable. Snacks sold through a vending machine are taxable. GST/HST included in the selling price. 17

18 Supplies made by school boards Sale of capital property General rules The supply of a capital property is taxable where used primarily (more than 50%) in commercial activities before the supply. Examples Used gym or arena equipment used primarily in taxable activities to another school board is taxable where the equipment was used primarily in taxable activities. Sales of the following goods are exempt as used primarily in school activities. Sale of used student desks Sale of used computers Sale of used conference tables Sale of used laptops 18

19 Supplies made by school boards Fundraising Activities General rules Admission to a fund raising activities Exempt Where a charitable receipt may be issued Sales of goods on a non-recurring basis Exempt Fund-raising activities Exempt Examples Dinner, Ball, Concert, Show, etc. Walk-o-thons, Dance-a-thons 19

20 Real Properties Leases General rules Lease of a real property where continuous possession or use of the property under the lease agreement is less than one month Taxable Lease of a real property where the continuous possession or use of the property is for a period of at least one month Exempt Lease of a real property for nominal consideration Exempt 20

21 Real Properties Leases Examples A school board is leasing a school pool to a municipality. According to the agreement, the municipality will have access to the pool each Monday from 6pm to 10pm and each Saturday from 9am to 4pm. Leasing period: January 1st, 2015 to June 30, The rate charged to the Municipality is $35/hour. The lease is taxable. Although the lease agreement is for a period exceeding one month, the municipality does not have continuous possession or use of the pool for a period of at least one month. 21

22 Real Properties Leases Examples A school board is leasing an office to a NPO. According to the agreement, the NPO will have full access to the office 24/7 for the next 12 months. The rental fees are 200$/month. The lease is exempt as the continuous possession or use of the office is for a period of more than one month. A school board is leasing a gym to a community group during the summer. According to the agreement, the community group will have access to the gym 24/7 from July, 2015 to August 15, The rate charged to the community group is $1/week. The consideration received is nominal then the lease is exempt. 22

23 Real Properties Sales General rules Sale of a real property primarily (50%) used in exempt school activities Exempt Sale of a real property primarily used primarily used in taxable activities. Taxable Sale of a real property where the school board has filed a 211 election Exempt 23

24 Real Properties Sales Examples A school board is selling a school which was used in both, exempt (education) and taxable (short term lease to a day care) activities The school was used 80 % for educational supplies. The school was used 20% for short term lease. The sale is exempt. A school board is selling a school which was used in both, exempt (education) and taxable (short term lease to a day care) activities The school was used 80 % for educational supplies. The school was used 20% for short term lease. The school board has filed a 211 for this school. The sale is taxable as a 211 election has been filed. 24

25 Real Properties Sales Examples A school board is selling an arena acquired 10 years ago. During the last year, the school board has leased the arena to a Municipality and to another school board on a short term basis. The arena was used for the school board s activities only for 35% of the time. The remainder of the time (65%), it was leased to the municipality and the other school board. The sale is taxable as the arena was used primarily (50%) in taxable activities. 25

26 ITC vs PSB rebate General rule ITCs Registered school board carrying on taxable activities Full ITC available on related expenses. The selling price of the taxable goods and services to which the ITC relates should not be nil or nominal. Registered school board carrying both exempt and taxable activities Partial ITC available. To the extent or percentage (%) that the purchase is related to the making of taxable supplies. PSB rebate for % of the purchase related to exempt activities. Allocation of expenses between taxable and exempt supplies. Reasonable allocation method 26

27 ITC vs PSB rebate General rule ITCs Use in commercial activities ITC PSB rebate (68% - 93%) Current expenses 10 % or less No Yes Greater than 10% and less than 90% Yes Commercial % Yes Exempt % 90% or more Yes 100% ITC No Capital Property 50 % or less NO Yes Greater than 50 % Yes 100 % No Real Property Without 211 election Real Property Without 211 election 50 % or less NO Yes Greater than 50 % Yes 100 % No 10 % or less No Yes Greater than 10% and less than 90% Yes Commercial % Yes Exempt % 90% or more Yes 100% ITC No 27

28 ITC vs PSB rebate General rule ITCs Main issues Allocation method % taxable activities vs % exempt activities 50% rule real property and capital property 211 election where less than 50% taxable activities real property Overhead Time limitation to claim ITCs Up to 4 years Up to 2 years where school board made more than $6M of taxable supplies 28

29 ITC vs PSB rebate General rule PSB rebate PSB rebate for the amount of GST/HST paid on expenses used in exempt activities and non recoverable as an ITC. Type of PSB PSB rebate rate - Federal GST (5%) PSB rebate rate - Ontario Provincial portion of the HST (8%) Charities and qualifying non-profit organizations 50 % 82 % School boards 68 % 93 % Expenses incurred to carry out non-school activities and not otherwise recoverable by way of ITCs is limited to 50%/82% rebates. 29

30 ITC vs PSB rebate General rule PSB rebate Claim period Registered school board or school GST/HST reporting periods (annually, quarterly or monthly) Not registered school board or small supplier school September 1 February 28 March 1 August 31 Registered school with division number GST/HST reporting periods (annually, quarterly or monthly) 30

31 ITC vs PSB rebate General rule PSB rebate Time limitation to claim PSB rebate Up to 4 years to file its PSB rebate claim for a claim period. Not up to 4 years to claim the PSB rebate after the GST/HST has been paid or payable (as for ITCs). 31

32 ITC vs PSB rebate General rule Excise and GST/HST News No. 89 (Summer 2013) If a PSB has not claimed PSB rebates for several claim periods Should file separate rebate application forms for each claim period Should not consolidate rebates for multiple claim periods into the next rebate application. If a PSB has already claimed a PSB rebate for a claim period and subsequently discovers additional GST/HST that was paid or payable during that claim period Should adjust the previously filed rebate application. Cannot include the additional tax in the PSB rebate application form for a different claim period Amended rebate application form 32

33 ITC vs PSB rebate Documentation requirements Information requirement to claim ITC or PSB rebate Supporting documentation for ITC and PSB rebate The total amount paid or payable is less than $30 The total amount payable is $30 or more and less than $150 The total amount payable is $150 or more The vendor s name The date tax was paid or becomes payable The total amount payable The supplier s GST/HST registration number Confirmation that the amount payable includes the tax at a specified rate, or separate identification of the tax The school board or school s The terms of payment (e.g., discount) A description of each supply sufficient to identify it 33

34 QUESTIONS 34

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