The Quick Method for HST is a simplified way for eligible small businesses in Canada to calculate and remit GST/HST to the CRA. Instead of tracking input tax credits (ITCs) on most expenses, businesses remit a reduced percentage of the HST they collect.
For some businesses, the Quick Method can reduce bookkeeping work and improve cash flow. However, it is not the right fit for every business. Understanding how it works can help determine whether it may benefit your situation.
The Quick Method is an alternative GST/HST reporting method offered by the CRA for eligible small businesses.
Under the standard HST method, businesses:
Under the Quick Method, businesses:
The difference between the HST collected and the lower remittance rate can sometimes create savings.
Many small businesses use the Quick Method because it simplifies HST reporting and may improve cash flow.
Potential benefits include:
The Quick Method is often attractive for service-based businesses with relatively low operating expenses.
Not all businesses can use the Quick Method. Eligibility depends on revenue thresholds and industry restrictions.
Generally, businesses may qualify if:
Certain businesses and professionals may not qualify, including lawyers, financial consultants and accountants.
Eligibility rules can be complex, so businesses should confirm qualification before electing the method.
Under the Quick Method, businesses collect the full HST amount from customers but remit only a reduced percentage to the CRA.
For example: a business in Ontario charges 13% HST on invoices. Iinstead of remitting the full amount minus ITCs, it remits a lower CRA-prescribed rate.
Businesses using the Quick Method can still claim ITCs on certain major purchases, such as capital assets.
The amount of savings a business may receive under the Quick Method depends largely on its operating expenses and how much HST it typically pays on purchases.
Businesses with lower overhead costs and fewer input tax credits (ITCs) often benefit the most from the Quick Method. This is common for service-based businesses such as consultants, marketing agencies, or contractors that do not purchase significant inventory or equipment.
On the other hand, businesses with higher operating expenses or substantial HST paid on supplies, inventory, or equipment may benefit more from using the standard HST method, since they can claim larger ITCs.
Because the potential savings vary from one business to another, it is important to compare both methods using actual financial information before making a decision.
Suppose an Ontario consulting business invoices clients $100,000 plus HST.
Under the standard method:
Under the Quick Method:
If the business has relatively low expenses, the difference may create savings and reduce bookkeeping work.
The Quick Method is not beneficial for every business. It may not work well for businesses that:
In these situations, the standard HST method may produce better tax results.
Eligible businesses may elect the Quick Method by filing Form GST74 with the CRA. The election must be submitted before the applicable deadline and will remain in effect until the business revokes it or no longer qualifies.
If the Quick Method no longer makes sense for the business’s operations or expense structure, the election can also be revoked. Since timing rules and eligibility requirements apply, businesses should carefully review the decision before making changes to their HST reporting method.
The best method depends on your business’s industry, expenses, bookkeeping processes, and financial goals.
The Quick Method may be helpful for:
The standard method may be better for businesses with:
Comparing both methods using actual numbers is often the best approach.
The Quick Method can create savings for some businesses, but using the wrong method may increase costs or create compliance issues.
An accountant can help:
Seeking professional advice can help businesses avoid costly mistakes and choose the most effective approach, as every business’s circumstances and tax situation are unique.
For a deeper understanding of GST/HST obligations and opportunities, download GBA’s FREE HST for Business Owners eBook. The guide covers key topics including GST/HST registration requirements, maximizing Input Tax Credits, the Quick Method, Place of Supply Rules, Provincial Sales Tax, and HST obligations for non-residents.
Schedule a call today with one of our team members to discuss your accounting or tax needs – For More Details, Click Here.
This blog is not meant to provide specific advice or opinions regarding the topic(s) discussed above. Should you have a question about your specific situation, please discuss it with your GBA advisor.
GBA LLP is a full-service accounting firm in the Greater Toronto Area, but we primarily service all of Ontario as well as the rest of Canada virtually, except Quebec. Our team of over 30 provides audits and reviews of financial statements, compilations of financial information, and corporate tax returns. We provide specialized corporate tax and succession planning for small and medium businesses, in addition to general advisory services.
If you would like to schedule a call to discuss your accounting or tax needs with one of our team members, please complete the free, no-obligation meeting request on this page.
