Principal Issues: Where a home renovation contract is entered into by a home owner just before the expiry of the eligible period and the work is completed by the contractor after the eligible period, will the expenditures incurred for goods acquired or services received by the individual qualify for the HRTC?
Position: Goods must be acquired and services must be received during the eligible period to qualify for the HRTC.
Reasons: Section 118.04 of the ITA
XXXXXXXXXX 2009-034266
A. Mahendran
February 3, 2010
Dear XXXXXXXXXX :
We are responding to your correspondence, which we received on September 29, 2009, regarding the new home renovation tax credit (HRTC). In particular, you would like to know whether your interpretation of the definition of "qualifying expenditure" in subsection 118.04(1) of the Income Tax Act (ITA) is consistent with the Directorate's interpretation.
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant tax services office. However, we offer the following general comments regarding the HRTC.
Pursuant to subsection 118.04(1) of the ITA, a "qualifying expenditure" of an individual means an outlay or expense that is made or incurred for goods acquired or services received during the eligible period by the individual, or by a qualifying relation in respect of the individual, that is directly attributable to a qualifying renovation of the individual. The eligible period means the period that begins on January 28, 2009 and ends on January 31, 2010.
The examples you provided for clarification and our comments are as follows:
1. Mary entered into a contract to have her roof replaced on January 27, 2009 and provided a deposit to the contractor. The work was performed and completed on April 15, 2009, within the qualifying period. Mary is not eligible for the HRTC on this renovation.
Our comments:
Your interpretation is correct. In accordance with clause (b) of the definition of "qualifying expenditure" which is provided under subsection 118.04(1) of the ITA, the HRTC is not available in respect of expenditures for services received or goods acquired after January 27, 2009, and before February 1, 2010, if the expenditures are made or incurred pursuant to an agreement entered into before January 28, 2009. Accordingly, home renovations contracted for before January 28, 2009 do not qualify for the HRTC regardless of when the payment was made to the contractor or when the work was performed by the contractor.
2. John entered into a contract on January 29, 2010 to have the windows replaced in his home and provided a deposit to the contractor. The work was completed on April 15, 2010, outside the eligible period. John is eligible for the HRTC on this renovation.
Our comments:
According to the definition of "qualifying expenditure", services must be received or goods must be acquired during the eligible period that begins on January 28, 2009 and ends on January 31, 2010 to qualify for the HRTC. In the above-mentioned example, it appears that the window replacement work was started and completed after January 31, 2010, and therefore, the window replacement cost will not qualify for the HRTC. If some work was performed during the eligible period, the cost of that work will qualify for the HRTC.
We trust that the information provided is helpful.
Yours truly,
Nerill Thomas-Wilkinson
Acting Manager
for Acting Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
