Prospect (new industry)

A prospect phoned in today inquring corporate tax filing services.

Corporation is not even one year old yet.
The owners mentioned they will be completing their own bookkeeping (I realize I will have to look over their books and point out errors as I have done for other clients who have done their own bookkeeping in the past).

However, I have no experience in the industry of “IT and research” and I do not wish to take on a client that I cannot properly service.

Personally, I’ve worked with many types of businesses ranging from a tattoo artist up to a law practice. But never with an IT company.

Does IT have any major complexities in it and therefore I can refer the prospect off or is it straightforward for the most part (no sales to the US)?

“IT” (information technology) covers a broad range of services. These days, even accounting could be considered “IT” (and, in fact, a large portion of my revenue comes from troubleshooting accounting software, and helping clients understand and use technology in various forms). So, you’d have to get more info from the prospect.

I have (or have had) clients that do computer repair, security system installation, development of food processing technology, and even software development (was not a client for more than a year). None of those clients had/have accounting complexities that were beyond the capabilities of an average accountant. For example:

The client that develops food processing technology was initially very secretive about their business deals, because it is still the only company in Canada that provides that particular technology. So, for the first couple years, they wouldn’t tell me when they had purchased a $100,000 machine from their counterpart in India, or when they had installed that machine at a customer’s location, because no money had changed hands (except maybe a $5,000 deposit). That is, they didn’t understand the concept of accounts payable/receivable. Even when I saw the deposit in their bookkeeping records, and asked about it, they were reluctant to share a copy of the legal agreement that detailed what was going on, and it was not clear (until I read that agreement) whether these machines should be considered inventory or capital assets (in this case, it was a capital asset, and they have a revenue sharing agreement with their “client” - the client uses the machine to process grain into various products which are then sold to grocery stores, etc).

The only clients that have had accounting complexities which “taxed” my capabilities have been construction companies - particularly due to the GST and PST issues regarding real-estate. I have yet to see a GST rebate application go smoothly. For example, a few years ago (when I first saw this situation) I didn’t know there was a different rebate form for new residential rental properties as opposed to houses built to be sold. And, when you call CRA to ask how to report a GST rebate like this, you get different answers - “DON’T report it on the normal GST return”, “DO report it on the normal GST return”, “include it in line 101”, “exclude it from line 101”, etc. And every rebate application gets reviewed, and even the CRA auditors give you different instructions on how you “should have” reported it.

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I’d agree with @Nezzer … most small businesses (<$10-20M in sales) are quite straightforward, especially from a pure tax perspective.

Occasionally they do things that they don’t bother to communicate about…and THAT is where the complexities usually arise: “Oh, we bought some land, are selling our commercial condo, are developing a new shop on the land…andn we bought it all personally. Can we write everything off? Our realtor said it would be fine.” (Yes…that has happened.)

“Research” OTOH is a broad field and so far I’ve failed to find any client who qualified for SRED who said they did original “research”.

Contractors, especially in construction, have some accounting or tax nuances, but generally nothing one really can’t easily learn from your pals (here or elsewhere) or by reading. Cost accounting is a different issue.

IT though? Mostly service, some sales, some assets. Just another business.

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Meet client on street “Hey, we sold the business”

“Shares or assets?”

“Yep, we sold the whole thing”

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Yep, but “what” did you sell?

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In the realm of IT, the primary complexity I encounter revolves around discerning whether a company falls under the PSB classification. This typically entails a thorough review of their contracts. If they are indeed classified as a PSB, the next step is advising the client on measures to prevent the CRA from deeming them as such.

One particular frustration that really gets under my skin is this misconception that some people have, if the contracting employer doesn’t conduct any business within Canada, then there’s no need for the client register an RT account. Rectifying this requires a considerable time investment — reaching out to the CRA to initiate the RT account setup, followed by the submission of a request letter to retroactively establish the account, etc.

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@GuyWhoPlaysGolf Good point on the PSB. That just came up on someone who asked my to quote on services to his corp which I declined to do, largely because it would have been a PSB and he wouldn’t have wanted to file as such…

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I have several IT clients; one has been good to work for different companies; the other has been very much working for mostly one government client. I have advised that it would really be very bad for her personally if CRA ended up classing the business as a PSB.

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