Keeping records and being reviewed - Segment 13
Host: Welcome to the segment called Keeping records and being reviewed, part of the CRA’s GST/HST Information for a New Small Business video.
With me is John Kelly.
Subject matter expert: Thank you Kathleen.
Host: Can you explain why I need to keep records for the GST/HST?
Subject matter expert: The CRA uses the term books and records to refer to various documents detailing your income and expenses.
You have to keep all the records that will support the information you provide on your GST/HST returns.
You have to keep adequate records if you are: carrying on a business or engaged in a commercial activity in Canada; required to file a GST/HST return; or you are applying for a rebate or refund.
In addition, if you are required to file a GST/HST return, you must make sure that your records describe the goods and services being traded in sufficient detail to determine whether they are subject to the GST/HST.
Keeping your records is important, since the CRA may ask to review them.
Not only that, keeping track of your revenues and expenses will make things easier for you when completing your GST/HST returns.
Host: What do my books and records have to consist of?
Subject matter expert:The records must be supported by original documents such as:
- sales invoices and purchase invoices;
- vouchers; banking information;
- directors and shareholders minutes;
- general ledgers; special contracts; and
Your records have to allow you to calculate: the amount of tax you have to pay or collect; or the amount of tax to be refunded, rebated, or deducted from your net tax.
Your records must be kept in English or in French.
Host: Oh, okay. Now that I have an idea about what records I should keep, where should I keep the records?
Subject matter expert: Records should be kept in Canada, and are usually kept at your place of business, although, you may keep them elsewhere such as your residence if you choose to. If you want to keep your records outside Canada, you have to ask for written permission from the CRA.
Host: How long do I need to keep books and records for?
Subject matter expert: Usually, you have to keep all sales and purchase invoices and other records for your business operations and the GST/HST for six years from the end of the year to which they relate. However, the CRA may ask you to keep the invoices longer than six years.
Also, be sure to keep all records that relate to an objection or appeal until the process is finished and the time for filing any further appeals has expired.
Host: What’s a good resource for more information on books and records?
Subject matter expert: More information is available in the publication, Guide RC4409, Keeping Records.
In this guide, pay special attention to chapter 4 on GST/HST. The link is included in the Related links for this segment.
You can also get more general information about record keeping by viewing the CRA tax information video called Keeping Records, located at www.cra.gc.ca/videogallery. The link is included in the Related links for this segment.
Host: You mentioned making documents available to CRA officials, can you tell me more about what’s involved in that?
Subject matter expert: As part of its regular activities, the CRA selectively reviews or audits GST/HST returns and claims for rebates.
The CRA’s objective is to ensure the fairness and integrity of the self-assessment tax system.
They do this by making sure that tax returns and claims are prepared properly, and that taxpayers remit the proper amount and receive the amounts to which they are entitled.
Host: Are there different kinds of audits related to the GST/HST?
Subject matter expert: Yes, there are two types of reviews that could take place relating to GST/HST returns.
GST/HST returns undergo an impartial electronic review to identify potential errors or indications of non-compliance prior to assessment. This is called a pre-assessment review.
The second type of review is the post-assessment audit. The selection of a GST/HST return for a post assessment review is based on risk assessment for GST/HST information that must be included but was not; amounts that are over or under reported; or amounts that are reported incorrectly.
Host: What is generally involved in a pre-assessment review?
Subject matter expert: This examination process often results in requests for supporting information for the input tax credits claimed as well as details about the type of supplies made.
The examiner may give special attention to whether supplies are appropriately treated as taxable, zero-rated, or exempt.
For more information on whether a supply is taxable, zero-rated or exempt, please see the segment of this video called What is the GST/HST?
The CRA handles examinations using a national inventory. This means registrants may be contacted by examiners outside their geographic location.
Host: What is involved in an audit?
Subject matter expert: An audit is more comprehensive than a pre-assessment review and takes place at your place of business or at your authorized representative’s office.
Host: What does an auditor do?
Subject matter expert: The auditor will begin by giving you some general information, such as the scope of the audit, what years will be covered, how much time the audit may take, and what information the auditor will need from you to do the work.
The auditor will respond to your questions, inform you of your rights and obligations, and respect the confidential nature of information obtained during the audit.
For more general information on audits, go to the CRA tax information video called Keeping Records, located at www.cra.gc.ca/videogallery. The link is included in the Related links for this segment.
Host: What’s a good resource for more information on reviews and audits?
Subject matter expert: More detailed information is available on the CRA webpage GST/HST audit and examination.
Information is also available in the publication, RC4188, What you should know about audits.
The links are included in the Related links for this segment.
Host: Thank you John.
This concludes the segment called Keeping records and being reviewed, part of the CRA’s GST/HST Information for A New Small Business video.
Thank you for watching.
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