Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: Would a manufacturer of prefabricated homes be obligated to file T5018 returns for the payments made to subcontractors in respect of the manufacturing of the pre-fabricated homes at the manufacturer's plant?
Position: Yes.
Reasons: It is our opinion that "construction activities" includes the manufacturing of pre-fabricated homes. As such, a manufacturer of pre-fabricated homes who derives business income primarily from construction activities would be required to complete T5018 information returns for payments made to subcontractors in respect of goods or services rendered in the course of construction activities, subject to the exemptions in subsection 238(5) of the Regulations.
XXXXXXXXXX
2012-045865
M. Gauthier
(613) 948-1143
Attention: XXXXXXXXXX
June 10, 2013
Dear XXXXXXXXXX,
Re: Requirement to file T5018 information returns
We are replying to your email of August 13, 2012 in which you asked whether a manufacturer of prefabricated homes would be obligated to file T5018 returns for payments made to subcontractors in respect of the manufacturing of the pre-fabricated homes at the manufacturer's plant. We apologize for the delay in responding to your request.
Our comments:
In general, section 238 of the Income Tax Regulations (the "Regulations") is intended to capture payments made to subcontractors in respect of goods or services rendered in the course of "construction activities" by a person whose business income is derived primarily from construction activities.
The term "construction activities" is defined in section 238 of the Regulations and includes the erection, excavation, installation, alteration, modification, repair, improvement, demolition, destruction, dismantling or removal of all or any part of a building, structure, surface or sub-surface construction, or any similar property. Since the definition uses the term "includes", the list of items in that definition is non-exhaustive. As such, Interpretation Bulletin IT411R, Meaning of "Construction", may provide some additional guidance for interpreting the meaning of "construction activities". Notably, paragraph 1 of IT411R, states the following:
"Such activities are considered to be those normally associated with the on-site fabrication and erection of buildings, roads, bridges, parking lots, driveways, etc., which are intended to be permanently affixed to the land on which they are built.
However, in some cases
, the term "construction" may apply to activities which involve the manufacture of building products and structures which are transported from the place of manufacture to the place where they are intended to be permanently affixed. Such building products may, for example, include ready-mix concrete, asphalt, structural and reinforced steel, precast concrete sections and blocks, curtain walls, ductwork, and pre-fabricated components for buildings."
It is our opinion that "construction activities" includes the manufacturing of pre-fabricated homes. As such, a manufacturer of pre-fabricated homes who derives business income primarily from construction activities would be required to complete T5018 information returns for payments made to subcontractors in respect of goods or services rendered in the course of construction activities, subject to the exemptions in subsection 238(5) of the Regulations.
We hope these comments are of assistance to you.
Yours truly,
Terry Young, CA, CPA
Manager, Administrative Law Section
International Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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