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Starting July 1, 2010, some businesses are subject to HST Recapture.
This means that some of the HST these businesses pay on purchases is
not refundable.
In the simple scenario, for certain expenses you will only claim
back a certain percentage of the HST.
In the more complex scenario, only part of the HST for a certain
type of expenditure will be subject to the recapture!
This page only deals with the simple scenario, for now, and it
describes how to handle this in the General Ledger.
Simple Scenario - no allocations
Using Telephone expenses as an example...
- Create a new GL Account called HST ITC Recapture. It
should be located within your chart of accounts right after the
HST ITC (Paid) account.
- Create another GL Account called Telephone Expense ITC
Recapture. It should be located right beside your
Telephone Expense GL Account. This will assist you in
verifying the amount of ITC Recapture later on.
- During day-to-day bookkeeping, post your telephone expenses
as usual, with a DR to Telephone Expense and a DR to
HST ITC (Paid) for the full amount of the HST on the
telephone bill, as usual.
- When it comes time to calculate and submit your HST return,
you will need to calculate the amount of the ITC Recapture on
your telephone expenses.
- Print a GL Activity for your Telephone Expense GL
Account for the period of the HST return.
- Calculate how much HST has been paid with respect to
telephone expenses for the period (NOT your fiscal
year-to-date), and divide that by half. For example, if your
telephone expenses were $1000, then you would've paid $1000 x 5%
= $50 in HST on those expenses. Half of that is $25.
- This recaptured amount is an additional expense for you. In
order to track this amount properly, post this amount as a DR to
Telephone Expense ITC Recapture, and a CR to ITC
Recapture.
- When you file your HST return, use the amount in the ITC
Recapture GL Account for your HST return.
You will also need to include this account when you make the
journal entry to record your HST return.
- The amount posted as a DR To Telephone ITC Recapture
serves as an addition to Telephone Expense. It is best to
post it to a separate, companion expense account so you can
later on verify the amount of ITC Recapture you have claimed for
past months. If you were to simply post this as an additional
expense to Telephone Expense, then the amount of that
expense would be distorted and you would not be able to do this.
- For example, suppose you want to verify that you had
submitted the correct ITC Recapture amounts for the year. Your
Telephone Expense account will contain only telephone
expenses. The ITC Recapture related to your telephone expenses
will be posted separately in Telephone Expense ITC Recapture.
And your ITC Recapture account will show the amount of
recapture each month, before clearing it out to record your HST
return.
- If you subsequently post some
telephone expenses back-dated into prior months, you need to
remember to pick those up in your later HST return! Using the
method described on this page, with the Telephone Expense ITC Recapture
account, you would be
able to pick up these amounts after the fact and adjust for them
on your next HST Return. You would have to do a little bit of
adding and calculating of course, but at least the numbers are
there for you to use.
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