Late Filing of Election for Simplified Accounting
Please note that the following Policy Statement, although correct at the time of issue, may not have been updated to reflect any subsequent legislative changes.
GST/HST policy statement P-100R
DATE OF ISSUE
November 21, 1993
Revised August, 26, 1998
SUBJECT
Late filing of election for simplified accounting
LEGISLATIVE REFERENCE(S)
Subsection 227(2) of the Excise Tax Act
NATIONAL CODING SYSTEM FILE NUMBER(S)
N/A
EFFECTIVE DATE
January 1, 1991 for the GST;
April 1, 1997, for the HST
TEXT
This policy statement discusses what are acceptable conditions for extending Ministerial permission to late file the election for Simplified Accounting.
On a case by case basis, a registrant's application to late file the election for Simplified Accounting should be reviewed within the context of the following guidelines:
- Do not accept the late filed election for Simplified Accounting:
- where no returns have been filed and the registrant appears to be trying to calculate the most advantageous tax position by waiting until the end of the fiscal year and then choosing the most favourable method of filing; or
- where the registrant has consistently filed returns in the usual manner and then submits adjusted information for each filing period with the election form.
- Accept the late filed election for Simplified Accounting:
- where the evidence of the registrant's course of conduct clearly demonstrates that the Simplified Accounting Method has been used consistently; or |
- where a registrant has obtained inaccurate written information from the Department which has resulted in the registrant not electing for Simplified Accounting.
SAMPLE RULINGS
Example 1
Facts
1. A registrant has filed three GST/HST tax returns for the first three reporting periods of 1997
2. Each return has the calculation of net tax in the following manner:
Total Taxable Supplies: | $50,000 |
Total Purchases: | $20,000 |
Total GST/HST and adjustments: |
$30,000 |
Total ITCs and adjustments: | $25,000 |
Net Tax | $5,000 |
Payment Enclosed | $5,000 |
3.The registrant has submitted a written request for an adjustment to the previous periods as follows:
Total Taxable Supplies: | $50,000 |
Total Purchases: | $ |
Total GST/HST and adjustments: |
$ |
Total ITCs and adjustments: | $ |
Net Tax (5% of $50,000) |
$2,500 |
Payment Enclosed | $2,500 |
Ruling Given
The registrant would not be permitted to file in this manner.
Rationale
A late filed simplified accounting election would not be accepted because the usual method of accounting for GST/HST had been used consistently in three previous reporting periods.
Example 2
Facts
1. A registrant, who registered in 1995, is a quarterly filer. The account shows that four returns have been filed for 1996 using the usual method of net tax calculation. No returns were filed in 1997 until the fourth quarter when the registrant filed an election for Simplified Accounting along with tax returns for the three quarters in 1997 using the "new" method.
Ruling Given
The registrant is not permitted to late file the election for Simplified Accounting.
Rationale
A late filed election for Simplified Accounting is not accepted where no returns for the reporting period have been filed.
Example 3
Facts
1. A new registrant, who advises the Department that he is a "tax consultant", has learned that there are various methods to account for net tax. He requests information on how to calculate net tax.
2. The registrant was provided with information and was also advised by the Department, in writing, that based on his type of business operation, the registrant was ineligible to elect to use the Simplified Method of Accounting.
3. The registrant files all GST/HST returns using the usual method of net tax calculation. However at some future point, the registrant and the Department realize that, in fact, the written information that the Department provided was not correct, and that the registrant was eligible to elect to use Simplified Accounting.
Ruling Given
The registrant would be allowed to late file the election.
Rationale
When a Departmental error has occurred and the registrant has written proof of this mistake, then a late filed election is permitted.
However, if it is revealed that the registrant provided misinformation to the Department which led to the incorrect letter being sent out, then no election would be permitted.
Example 4
Facts
1. A registrant who files returns on a quarterly basis, has filed GST/HST tax returns for 1996 and 1997 using one of the Simplified Accounting methods.
2. At the beginning of the 1998 tax year, it is discovered that this registrant has not filed an election for Simplified Accounting.
Ruling Given
The registrant may late file an election for Simplified Accounting.
Rationale
Where the registrant's filing history clearly demonstrates that a Simplified Accounting Method has been used consistently, then the late filing of an election is permissable.
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