The quick method of accounting is used by small businesses to calculate HST remittances or file returns. This method is quite simple and straightforward because it doesn’t require one to report actual HST paid or payable on all the purchases. Therefore, using this method in HST filing can significantly reduce paperwork.
With this method, you will still have to charge HST on your taxable supplies at the rate that is applicable depending on the type and structure of your business. However, for you to get the amount of HST that will be remitted, you multiply the remittance rate for the quick method by the HST supplies for that reporting period.
Will The Quick Method Be Beneficial To Use?
Since the remittance rates for the quick method are usually lower than the applicable rates of HST for your business, you will only remit part of the tax that has been collected. This means that the remaining part of the tax you haven’t claimed will act as the ITCs on some of the purchases which you cannot claim using this method. Your unique business situation will determine whether this method would be more advantageous to use than the regular method.
Who Cannot Use The Quick Method?
There are certain exceptions; businesses that cannot use the quick method of HST filing. They include:
- Businesses that offer legal, accounting or actuarial services within their practice
- Municipalities and local authorities
- Businesses that offer bookkeeping, tax consulting and preparation among other financial consultancy services.
- Not for profit public schools and colleges
- Public institutions
- Not for profit organizations that receive at least 40% of funding from the government in a year
Public service bodies and non-profit organizations can use a special quick method of accounting for GST/HST purposes.
Are You A New Registrant?
If you just registered for HST and your business is among those that are eligible to use the quick method, you can use it in the first year of business. The only condition is that you should expect the revenue you obtain from worldwide taxable supplies to be not more than $400,000. However, make sure you make the election on time. If you normally file your returns annually, you need to make the election by the first day of the second fiscal quarter. For those who file returns either monthly or quarterly, an election has to be made by the due date of the return. You will have to indicate to the CRA the exact date when you start using the quick method which has to be the first day of the HST reporting period.
To summarize, the quick method allows you to charge GST at 5% and HST at the applicable rate then remit only some part of the tax to the CRA. Remember the applicable HST rate may vary depending on the province and type of business. When you choose to use this method, you cannot claim ITCs for most of your purchases because part of the tax you are allowed to keep will cater for the approximate amounts of ITCs you would have claimed.