Systemic investigation into whether the Canada Revenue Agency provides sufficient information regarding personal services businesses

February 25, 2016

The Office of the Taxpayers’ Ombudsman is closing, without recommendation, its systemic investigation into whether the Canada Revenue Agency (CRA) provides taxpayers sufficient information regarding personal services businesses (PSB) to allow them to accurately determine that they are a PSB and that they should file their income tax returns as a PSB.


This systemic investigation was initiated in April 2013. Individuals complained that after incorporating their business, as was required, in order to bid on and obtain contracts for services with the Government of Canada, they believed they were entitled, as corporations, to deduct several business expenses and small business deductions. However, they were subsequently audited by the CRA, which determined they were PSBs and as such not entitled to the business expenses claimed or to the small business deduction.

In the course of our examination of the individual complaints, my office found that information on PSBs was difficult to find on the CRA’s website. As a result, our investigation focused on whether the CRA provides taxpayers information that is sufficient and clear enough for them to reasonably understand what a PSB is and what the filing obligations of a PSB are.


At the onset of our investigation, when searching the CRA’s website, relevant documents on PSBs were not generated on the first or second page of search results. The CRA has since adjusted its metadata strategy to generate more relevant results. Interpretation Bulletin IT-73R6, The Small Business Deduction is now the first result that is generated by a search.

Originally the CRA provided information on PSBs on its website in two sources. One was Interpretation Bulletin IT-73R6, The Small Business Deduction. The other was chapter 4 of the T2 Corporation – Income Tax Guide.

In April 2015, the CRA made available more information on PSBs when it published Canada Pension Plan and Employment Insurance Explained: Information technology consultants - Employees or self-employed workers? The CRA also updated the information regarding PSBs in the 2015 T4012 T2 Corporation – Income Tax Guide.

We were also originally concerned by the “archived content” notice appearing on Interpretation Bulletin IT-73R6, The Small Business Deduction since it might lead taxpayers accessing the page to believe that the content was no longer accurate. The CRA has since added information to its website explaining that the notice only relates to the web status of the publication, and not its content.

We found that part of the issue stemmed from the expectations that taxpayers developed as a result of Public Services and Procurement Canada’s (formerly Public Works and Government Services Canada) requirement for them to be incorporated to win federal government contracts. In March 2014, the CRA gave an educational presentation on PSBs to Public Services and Procurement Canada.

We concluded that the CRA’s actions have adequately addressed the issues identified in the course of our investigation. My office has received no further complaints on the matter.

Next steps

A copy of this memorandum will be published on the Office of the Taxpayers’ Ombudsman’s website 60 days following its receipt by your office. A summary of our findings may also be included in our next 2015-2016 annual report or published in a future newsletter on our website.

Should you require additional information, please do not hesitate to contact me.

Original signed

Sherra Profit

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