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Principal Issues: [TaxInterpretations translation]
What expenditures are eligible for the HRTC where certain expenditures are made or incurred during the eligible period to acquire goods or receive services during the eligible period when not all of the qualifying renovations relating to those goods or services are completed during the eligible period?
Position:
Expenditures incurred or made during the eligible period for property acquired in that period will be qualifying expenditures for the HRTC, even if the renovations or alterations related to that property are not carried out until after the eligible period.
Similarly, expenditures incurred or made by a syndicate of co-owners in the eligible period for services rendered in that period, such as the development of a renovation plan, will be qualifying expenditures for the HRTC even if the qualifying renovations relating to those services is not carried out until after January 31, 2010. However, expenses incurred during the eligible period for services that are not performed until after the eligible period will not be eligible for the HRTC. If a portion of the expenditures incurred or made by a syndicate of co-owners in the eligible period for qualifying renovations includes a portion for services that will not be rendered before January 31, 2010, only the portion of the expenses incurred or made in the eligible period for services rendered in that period and that relate to qualifying renovations will be eligible for the HRTC.
Reasons:
Legislative analysis.
XXXXXXXXXX 2009-034682
I. Landry, M. Fisc.
December 7, 2009
XXXXXXXXXX,
Subject: Home Renovation Tax Credit
This is in response to your letter received on November 4, 2009 requesting our comments on the home renovation tax credit ("HRTC").
Specifically, you requested our comments on the eligibility for the HRTC of expenditures made or incurred during the eligible period to acquire property in the same period that will not be used until after the eligible period. You also asked us to comment on the eligibility for the HRTC of expenditures made or incurred during the eligible period for the development of renovation plans when the plans so developed will not be used until after the eligible period.
The situation you have indicated in your letter appears to be related to an actual situation, which concerns a specific taxpayer. As explained in Information Circular 70-6R5, Advance Income Tax Rulings, it is not the Directorate’s practice to comment on proposed transactions involving specific taxpayers otherwise than in the form of an advance income tax ruling. If your situation relates to a specific taxpayer and a completed transaction, you should forward all relevant facts and documents to the appropriate Tax Services Office for its views. We are, however, prepared to provide the following general comments, which we hope you will find helpful.
The proposed HRTC is a temporary 15-per-cent non-refundable tax credit accorded to individuals for qualifying expenditures. Individuals will be able to claim this credit in the 2009 taxation year for qualifying expenditures in excess of $1,000 but not exceeding $10,000, resulting in a maximum non-refundable credit of $1,350.
Legislation for the new HRTC was introduced in the House of Commons on September 30, 2009, by the Honourable James M. Flaherty, Minister of Finance. The proposed legislation states that expenditures are generally qualifying expenditures for the HRTC if they are made or incurred during the eligible period and are directly attributable to qualifying renovation work. In addition, such expenditures must represent the cost of goods acquired or services received during the eligible period. These expenditures will include the cost of labour and professional services, building materials, fixtures, equipment rentals and permits.
Under the proposed legislation, the eligible period for the HRTC is the period that begins on January 28, 2009 and that ends on January 31, 2010. Respecting a qualifying renovation, the proposed legislation defines it as a renovation or alteration, of a property that is an eligible dwelling that is of an enduring nature and that is integral to the eligible dwelling.
An eligible dwelling is a housing unit located in Canada that is owned by an individual at the time of the renovation or alteration, and that is ordinarily inhabited by the individual, the individual's spouse or common-law partner or former spouse or common-law partner or by a child of the individual during the eligible period.
As stated above, expenses made or incurred by a syndicate of co-owners will generally be qualifying expenditures for the HRTC if inter alia they were made or incurred after January 27, 2009 and before February 1, 2010 for work performed or property acquired in that period. These expenditures must be directly attributable to renovations or alterations on an eligible dwelling.
In a situation where a syndicate of co-owners incurs or makes expenditures within the eligible period and the related qualifying renovations will not be carried out until after the eligible period, the following rules will apply. Expenditures made or incurred by a syndicate of co-owners in the eligible period for property acquired in the eligible period will be qualifying expenditures for the HRTC even if the qualifying renovations relating to that property is not carried out until after January 31, 2010.
Similarly, expenses made or incurred by a syndicate of co-owners during the eligible period for services rendered in that period, such as the development of a renovation plan, will be qualifying expenditures for the HRTC even if the qualifying renovations relating to those services is not carried out until after January 31, 2010.
However, expenses made or incurred by a syndicate of co-owners during the eligible period for services relating to qualifying renovations that are not rendered until after the eligible period will not be eligible for the HRTC. Where a portion of the expenses made or incurred by the syndicate of co-owners in the eligible period for qualifying renovations is for services that will not be rendered before January 31, 2010, only the portion of the expenses made or incurred in the eligible period for services rendered in that period and that relate to qualifying renovations will be eligible for the HRTC.
Best regards,
Louise J. Roy, CGA
Manager
for the interim Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch.
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