A company was established in 2017, new shareholders bought it in May 2023, and the previous accountant has filed T2 up to May 18, 2023. Now we are filing T2, should I create a new T2, and would the Tax year start date be May 19, 2023?
I don’t have any previous documents.
That is what I did for the company my son bought several years ago and there have been no negative consequences to date.
Once you have authorization thru rep a Client, you should be able to see previous T2s filed.
The Previous accountant should provide you with an Opening Trial Balance, Detailed AR, AP, Inventory, Capital Asset list, Loan and Lease details, if any apply in this situation.
Unless specified in the Purchase and Sale agreement ( which you need a copy of ), the time of sale is deemed to be effective at 23:59pm. Therefore, you begin your new year at 00:00 of the following day.
Another resource document that you should obtain is the Change of Directors that was submit to the Corporate Registry in your jurisdiction ( usually prepared by the lawyer who oversaw the Purchase & Sale).
It should state date and possibly time that certain persons ceased to be Shareholders and when others became Shareholders.
As your client has purchased the shares of the company, and now has control, he should have access to all the past records of the company. If he does not, he should request them now, especially as if the company gets audited, he is responsible.
Yes, unless the previous accountant gave you a copy of the TaxCycle file (or Profile or TaxPrep or other software data file) as filed for the period ending May 18, 2023. If you have such a file from the previous accountant, you could just “Carry Forward” that file to create the current period file (the one you are hired to prepare).
Yes - whenever there is a change in control, there is a deemed year-end as of that date. If the new owner/shareholder took possession on May 19, that will be the start date of the next tax period. By default, the next “year-end” date will be May 18, 2024, but that can be changed fairly easily - have the owner write (or at least sign) a letter to CRA requesting a different year-end date (specify the preferred year-end date), due to the acquisition of control.
Start date had to be May 19, end date is optional, but can’t exceed 12 months. I’d choose April 30 unless there are compelling reasons to choose another date. Client will get the most bang for the buck by choosing the longest period possible.
I’d never give a new accountant my TaxCycle or CaseWare files, or any spreadsheets I developed to facilitate my work. They are my files that I worked to set up. Giving them away is doing a lot of free work to the new accountant. I look to the CPA rules and code of conduct to see what I’m obligated to provide. And it’s all in pdf format. Not to be obstinate, but I’m not giving up my files in any other form. At least, not for free. If you have a CaseWare file properly set up with all gifi codes, the T2 is almost done. Depending on size and complexity, a CaseWare file is priceless.
I never once thought of asking for previous records. In my mind they are the property of the previous owner. My customer and the previous owner had a longstanding relationship and if an audit came up, we would have worked with the previous owner and accountant to resolve it.
Sorry. The records belong to the company, not the shareholder.
As a professional, I look to the best interest of the (ex)client. As such, I readily pass on the records in the best way possible, including Caseware and Taxcycle files. And I hope that prior accountants do the same when I take over a file.
Like Bert I ensure any client leaving us has all pertinent information sent to the new accountant. Professional and leaves a positive message. I have had clients return to us and part of the reason was we did not make the “leaving” difficult.
I agree. The Caseware file belongs to the firm that prepared it, and there is a lot of proprietary knowledge contained therein. However, in my firm, we don’t include much extra info (notes/memos/etc) in the TaxCycle T2. Everything in TaxCycle is printed (or saved to PDF) and given to the client anyway. So, I don’t mind giving our TaxCycle file to a client who asks for it (rarely happens though).
When we take over a new client from another accountant, I always ask for as much information as possible. A couple of times I have even received a copy of the prior year taxes (once in Profile, once in TaxCycle). But, a PDF copy just means a bit of manual data entry - not usually more than an hour’s work (which, again, could be reduced to almost nil once @Steven is able to incorporate importing the COR files from CRA 
(poke)).
One question, due to change in ownership, the losses will not be carried forward right?
If the new owners are carrying on the same business (i.e. no operational changes, no restructuring, etc) then the losses should technically be carried forward, but be prepared to prove it to CRA.
Read the next paragraph. There are conditions where the losses can be deducted. For example if the business continues like it was before you usually should be able to deduct the losses.
