Question Period Note: PERSONAL SERVICES BUSINESSES

What is the CRA doing to stop employers from misclassifying employees as independent contractors?

• Canadians are grateful for the work done daily by truckers which is essential to the functioning of the Canadian economy.

• Canadian laws allow some flexibility in the corporate structures an individual can choose to set up its business, including personal service business.

• The Canada Revenue Agency (Agency) works in collaboration with the other departments to ensure that these businesses comply with their
  obligations, including those under the Income Tax Act

• Additionally, the Agency is working to strengthen education efforts through the development of guides, webinars and educational outreach.

• The Agency will conclude an educational outreach project in December aimed at supporting businesses that potentially hire personal services businesses understand and comply with the tax obligations associated with their situation.

The CRA launched an educational outreach project to help industries that hire people who operate personal services businesses (PSB) understand and comply with the tax obligations associated with this type of arrangement.

Between June and December 2022, CRA officials are contacting Canadian businesses from a sample of different industries that potentially hire PSBs to help determine whether or not these companies are fulfilling their tax obligations. As part of this project, the CRA officials will be asking the businesses to provide documentation on the nature of their payer/payee relationships, such as accounting books, records and contracts.

Those operating PSBs, or incorporated individuals, will not be contacted, but the business that hired them may be and may share information with them about the tax obligations associated with being a PSB.

Participation in this educational outreach project is voluntary. Businesses that choose to participate will benefit by gaining a better understanding of the requirements that must be met in order to comply with the Income Tax Act (ITA). This will reduce the likelihood of errors in future submissions to the CRA. For a list of requirements visit T4A – Information for payers - Canada.ca, Information for payers of the T5018 - Canada.ca, and Information for payers of the T1204 - Canada.ca.

This project will help to ensure that tax reporting errors are corrected and promote compliance with the ITA. As such, the CRA will advise businesses hiring PSBs of tax reporting errors so that they may be corrected.

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