So for meals and entertainment only 50% of the HST is allowed to be claimed as an ITC, correct?
Can that 50% not covered by the ITC be used to reduce taxable income?
For reference I am not formally educated in accounting, but do my own books for my corporation and am curious about the correct way to do this.
Thanks!
The answer is no.
Please see this link:
The answer is YES. 50% of the ITC is added back to the meal expense.
In the example that was attached the total Paid was $ 107.00.
This is meals $ 100.00 & GST $7.00.
ITC is $ 3.50. [50% of $7.00]
Total to be reported as meals in F/S is $ 103.50.
On the T2 50% of the $103.50 [i.e. $51.75] is recorded as non-deductible.
@rpeters got it correct. @JBAMurphy and @Rein, Read carefully through the Tax Interpretation bulletin. Toward the end it specifically outlines how to split the $107.00, and clarifies that the total eligible amount is $53.50, of which $3.50 is GST and $50.00 is a deductible meal expense. The remaining $53.50 is not deductible in any way.
I think you are right. I did not read that correctly. But I think that Oulton got it wrong.
Take for example the case where one is not registered with HST at all.
If Oulton got it right, you should also argue that any non-registrant with HST can only claim pre-HST amounts on ANY expense. This has clearly never been the case. The HST not claimed [because they are not registrants] just becomes part of the cost of doing business. So why we should exclude non-claimable HST when it is just meals but okay when it is anything but meals is mystery to me.
His argument is based on a reading of 67.1(1)(a) where the meal amount that is deductible is " the amount actually paid or payable in respect thereof, and…"
I would read this as $ 53.50 for a non-registrant.
Why would a registrant only be allowed based on the pre-tax total, but a non-registrant based on the total including tax.
Opinions of CRA are not law. They are an interpretation.
Thanks for sharing that with me!