Regulation 238

Administrative Policy

10 June 2013 External T.I. 2012-045861E5

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.

Subsection 238(1)

Administrative Policy

5 February 2013 External T.I. 2012-0465591E5 F - Form T5018

landscaping business could be construction

A landscaping company carries out different types of construction under some landscaping contracts such as excavation and rock fill, the installation of unistone or concrete sidewalks and the construction of small terraces or flower boxes. The invoice does not provide a breakdown of the price between the different types of work. Does its income come primarily from construction activity for the purpose of the T5018 slip filing requirement? CRA responded:

[T]he term "construction" in its ordinary meaning and …[Reg.] 238(1) … are broad enough to include most of the projects that could be qualified as landscaping. For example, some projects could be considered as the installation or improvement of a structure on the surface or sub-surface, the surface being the land or property.

A construction activity could include a task required to complete that construction activity or achieve the result of that construction activity, even though that task might not be a construction activity in itself if it were the only task performed in the framework of a landscaping project. As a result, it may not be appropriate to analyze revenues and separate them according to the tasks performed.

Words and Phrases

Subsection 238(2)

See Also

Apex City Homes Limited Partnership v. The Queen, 2018 TCC 247 (Informal Procedure)

business of contracting out condos’ construction, and then selling them, was caught

The appellant (Apex) was a limited partnership that developed and sold the residential condominiums in a particular Calgary condominium project, consistent with its parent’s practice of forming a separate LP for each of its condo projects. Apex hired a general contractor to construct the condo units who, in turn, engaged the trades.

In finding that Apex was required to file T5018 Summaries pursuant to Reg. 238, MacPhee J noted (at para. 18) Apex’s submission that “they are not in the business of constructing condos; they are in the business of selling condos after they are constructed,” noted (at para. 21) that in Garcia, “derived” was interpreted “to mean something akin to ‘having its source’,” and then stated (at para. 22):

[T]he source of the Appellant’s business income comes from two integral phases of their business operations; 1) the construction of condos, and 2) the sale of the condos. … To ignore the construction component of the Appellant’s business would be an incorrect interpretation of the phrase “derived primarily from”.

Words and Phrases
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 162 - Subsection 162(7) due diligence defence was not available where the taxpayer incorrectly disagreed with a CRA position 175

Administrative Policy

8 October 2010 Roundtable, 2010-0373691C6 F - T4A et T5018 - Honoraires

unlike T4A, amounts paid include GST/HST

When asked to comment on the reason that T4A slips are not to include the GST/HST paid to the recipient for services rendered, whereas for T5018 slip purposes, payments made to a subcontractor include GST/HST, CRA stated:

On the one hand, the amount to be reported on the T4A slip is generally an amount prescribed by subsection 153(1) to be included in computing the income of the person who received the amount. … The GST, HST, QST or provincial tax portion, if any, of the amount paid should not be reported on the T4A slip since it is not an amount under subsection 153(1) and is not required to be included in computing the recipient's income under the Act.

On the other hand, the amount to be reported on the T5018 Information Return - Statement of Contract Payments refers to amounts paid or credited for goods delivered or services provided in the course of a construction activity. Thus, the person is required to record payments, including all taxes (GST, HST, QST, or provincial tax, if applicable), made to subcontractors who provide construction services and report them to the CRA. The T5018 Information Return - Statement of Contract Payments is mandatory for any payment for goods delivered or services provided where the total payment is $500 or more in the year. However, no information return is required where the amount is paid or credited in full on account of the sale or lease of goods.

Finally, no information return is required to be filed under ITR subsection 200(1) (T4A slips and the corresponding T4A Summary) in respect of a particular payment made by a person if an information return (T5018 - Statement of Contract Payments) has been filed under ITR section 238 for that particular payment.

Locations of other summaries Wordcount
Tax Topics - Income Tax Regulations - Regulation 200 - Subsection 200(1) GST/HST excluded from services payments 30

4 December 2007 Internal T.I. 2007-0237461I7 F - Définition d'activité de construction

construction activities included cable installation, maintenance and upgrading/primarily means over 50%

The taxpayer, which had queried whether it was required to file T5018 slips for payments made to subcontractors, was engaged in the installation of cabling, both public and residential lines – and also was involved in the construction of overhead and underground cables, the installation of equipment, the maintenance and renovation of networks, the interior and exterior pre-wiring of buildings and the installation and servicing of certain products. The Directorate stated:

The definition of construction activity is broad and we are of the view that it includes cable installation, construction of underground and aerial cables, maintenance, modification and upgrading of the cable network, installation of indoor and outdoor pre-wiring. ....

Determining whether income from construction activities represents more than 50% of the corporation's total income is a question of fact that requires an examination of all the facts and activities actually performed.