Subcontractor expenses

Hi,

I am trying to figure out the best way to record Subcontractor expenses in Sage 50 2017.

Would it be best when entering the Subcontractor supplier invoice for labour to also record the expenses here

i.e. gas reimb  or materials

Also, if no receipt provided, do I still back out the gst and or pst where applicable when recording these expense reimbursements.

Thanks for the help!

JaniceH

  • 0
    I am a little confused by your question. If you have the invoice for expenses why wouldn't record them when you record the invoice? If you are to pay the subcontractor the expenses, wouldn't those expenses be billed to you on the invoice?

    If no receipt is provided, I wouldn't pay. But if that's not an option, you need to validate whether they are in fact legitimately able to charge you those taxes before you start entering made up data.
  • 0 in reply to Richard S. Ridings

    Hi Richard
    Yes, I am recording the expenses when I enter the subcontractor invoice, but the expenses are showing up when I produce the T5018 report which I don't want. Would I have to set up the expenses under a separate invoice? Sorry I should have elaborated a bit more

    And I do agree with the validation on the expenses, I'm trying to get this client to not pay unless receipts are provided (baby steps for them)

    Thanks
    Janice

  • 0 in reply to JaniceH

    Yes, you should have probably lead with "this is a T5018 issue" and I would not have responded.

    I don't have to do any T5018's so someone else will have to help you out on this one.

    From a brief review of the CRA website here it says

    Cra said:
    Goods-only payments do not have to be reported. Mixed service and goods payments are reported if there is a total annual service component of $500 or more.

    I have never discussed this with the CRA to validate exactly what this means, so someone else should probably provide some help for you on this.

  • 0 in reply to Richard S. Ridings
    Sorry thanks Richard
    Hopefully someone else can help :)
  • 0
    Since the T5018 printing does not allow you to choose which GL accounts to include, you would end up over-reporting the revenue for the year if you post reimbursable expenses to the vendor. The easiest work-around would be to have 2 vendors set up per subcontractor, one for labour and one for expenses/material and only flag the labour vendor to print a T5018.

    If there is no physical receipt it is a risk to record the taxes as they may be rejected on review should the client ever face an audit. A few things like gas receipts you can probably get away as the tax rates are fixed. Ultimately I would get the client to agree in writing to those expenses being posted inclusive of tax if they so choose, that way at least you are cleared of liability should it come back up in future.

    Hope this helps!
  • 0 in reply to phughes
    Ok thanks for your suggestions! I have created 2 vendors as you mentioned and I'm working on trying to get the client to not pay subcontractors without a receipt

    Thanks
    Janice
  • 0 in reply to JaniceH
    A couple of things to note:

    1. T5018's are not intended to report exact contract revenue to CRA. They are merely intended to help CRA identify those who MIGHT need to be reporting contract revenue. There is no expectation that you, as the person hiring the contractor, will go the the trouble of splitting out expense-invoices from revenue-invoices. I work in an accounting office, and we always just report total payments to contractors on the T5018's - CRA can pick the numbers apart if they want to.

    2. You cannot claim GST input tax credits just because your contractor paid GST. This is a really common error, both on the part of contractors and of those who hire them. One of the requirements to claim an input tax credit is that the original invoice be in YOUR name. As mentioned above, occasional small items are usually not a problem, but here are a few examples of how it's supposed to work:

    There are 3 parties in the examples. YourCo, ContractorCo, and SupplierCo. ContractorCo is doing work for YourCo. SupplierCo is providing supplies needed for the job. I'm assuming this is happening in BC, with 5% GST and 7% PST. The PST is not refundable.

    Situation 1: ContractorCo and SupplierCo are both registered for GST. ContractorCo buys $100 of supplies from SupplierCo, and provides YourCo with a receipt for $112 ($100 supplies, $5 GST, $7 PST). The supply invoice was from SupplierCo to ContractorCo. On the same invoice, ContractorCo also bills for $200 of work. Because ContractorCo takes the supplies and incorporates them into your project, ContractorCo is the 'final user' for PST purposes - ContractorCo is not 'reselling' the supplies (intact) to you.

    ContractorCo should claim a $5 input tax credit because of the items they purchased from SupplierCo. ContractorCo's net cost for the supplies is $100 PLUS the $7 PST that they must pay as the 'final user'.

    ContractorCo should invoice YourCo $322.35 ($200 of work, $107 of supplies, plus GST of $15.35 on the whole works). YourCo should claim $15.35 of input tax credits, based purely on the amount of GST identified on ContractorCo's invoice to YourCo. While you are completely correct to require ContractorCo to provide a copy of SupplierCo's invoice, YourCo should NOT be claiming the input tax credits shown on SupplierCo's invoice to ContractorCo, as those ITC's belong to ContractorCo.

    Situation 2: Same as above, but SupplierCo is not registered for GST or PST. ContractorCo buys $112 of supplies from SupplierCo, and provides YourCo with a receipt for $112. (The invoice is for $112 because GST and PST form part of a non-registrant's costs). The supply invoice was from SupplierCo to ContractorCo. On the same invoice, ContractorCo also bills for $200 of work.

    ContractorCo should invoice YourCo $327.60 ($200 of work, $112 of supplies, plus GST of $15.60 on the whole works). YourCo should claim $15.60 of input tax credits, based purely on the amount of GST identified on ContractorCo's invoice to YourCo. While you are completely correct to require ContractorCo to provide a copy of SupplierCo's invoice, YourCo should NOT be claiming any imputed input tax credits, as there were none (and as they would belong to ContractorCo in any case).