Who has to file: the primary-source test, not the size of your payroll
You have to file T5018 slips if construction is your primary source of business income and you paid subcontractors for construction services during the period. Both halves matter. The Contract Payment Reporting System is aimed at the construction industry specifically, so a manufacturer that hires a contractor to renovate its plant is not caught, while a general contractor, a renovator, a paving company, an electrical or mechanical contractor, a home builder or a trade that subcontracts part of its work all are. Primary is measured against your business income as a whole: if more than half of it comes from construction activities, you are in.
Construction activities are defined broadly. Erecting, installing, altering, modifying, repairing, improving, demolishing or dismantling buildings, structures, surfaces and sub-surfaces, roads, pipelines and similar works all count, and so do the trades that feed them. The form of your business does not matter: sole proprietors, partnerships, corporations and trusts are all subject to it once they clear the primary-source test. What the slip covers is equally broad: any payment for construction services to a subcontractor, whether the subcontractor is a corporation, a partnership or an individual with a truck.
Two groups get this wrong in opposite directions. Developers and property managers with a construction arm sometimes assume they are exempt because their revenue is rent or sales, when the construction division on its own may push them over the line, or may be a separate corporation that is squarely in. And small trades assume the rule is for general contractors, when a framer who pays two helpers as subcontractors is filing the same slips.
What goes on the slip: the whole payment, HST included, and a number that identifies the trade
Each T5018 reports the total you paid one subcontractor for construction services during the reporting period, including the HST, on a cash basis: what was actually paid in the period, not what was invoiced. Where a payment covers both goods and services and you cannot separate them, the whole amount is reported; where you paid for materials alone with no service component, no slip is required. Payments below a small dollar minimum per subcontractor per period can be left out, so in practice every trade you use more than once gets a slip.
The identifier is the part that causes trouble. A corporate or partnership subcontractor is identified by its business number; an individual, including a sole proprietor operating under a trade name, by their social insurance number. You are required to make a reasonable effort to obtain it, and a slip filed without it can attract its own penalty. The moment to collect it is before the first cheque, on a subcontractor setup form that also captures the legal name, the HST registration number and the WSIB clearance, because a trade that has been paid in full has no incentive to return your calls in June.
The summary totals the slips and is filed with them. Slips do not have to be delivered to the subcontractors the way T4s must be, though many contractors send them, and electronic filing is expected once you are past a handful of slips. What you must keep is the working paper: the vendor payments report that produced the slip amounts, reconciled to the subcontract cost accounts in the general ledger, so the total reported on T5018s can be tied to the subcontract expense claimed on your return.
When it is due: your period, plus six months
You choose the reporting period, either the calendar year or your fiscal year, and file within six months after the end of it. A corporation with a September 30 year-end that reports on a fiscal basis files by March 31; one that reports on a calendar basis files by June 30. Once you have chosen a period, you keep it; changing it requires CRA's agreement, and the year of change has to be handled so no payments fall through the gap. Most contractors with a non-December year-end choose the fiscal period so the T5018 work happens alongside the year-end, when the subcontract accounts are already being reconciled.
The six months are generous and still routinely missed, because nothing in the ordinary monthly rhythm prompts the filing. It is not tied to a remittance, the software does not nag, and the subcontractors do not ask. We put it on the compliance calendar next to the T4s and the corporate return, with the vendor data pull scheduled in the month after year-end so the identifier gaps are found while there is time to chase them.
What happens if you miss it: the penalty, and the review it invites
A late or missing T5018 return is penalised as a late information return. The penalty is calculated per slip and per day late, with a minimum and a maximum that both rise with the number of slips you were supposed to file, so a contractor with a hundred subcontractors faces a materially larger penalty than one with ten. Failing to make a reasonable effort to obtain a subcontractor's business number or social insurance number can attract a separate penalty for each missing identifier. These amounts are not ruinous for most contractors, which is why they are underestimated; the real cost sits elsewhere.
CRA built the system to match. Every T5018 is compared against the subcontractor's own reporting, so a trade that received slips totalling more than it reported, or that was paid well past the registration threshold without an HST number, gets flagged. The same matching runs the other way: a contractor claiming a large subcontract expense with no T5018s behind it, or with slips that do not add up to the expense claimed, is the profile that draws a review of its own return. The subcontract line is the largest expense on most contractors' income statements, and a review that starts there does not stay there; it usually reaches the question of whether some of those subcontractors were really employees, with the source deduction consequences described in how to prevent payroll remittance surprises.
If you have never filed, or have years missing, the practical route is to file the outstanding periods now rather than wait for the letter. Voluntary correction generally costs the late-filing penalty and nothing more; a review that finds the gap costs the penalty plus the questions that come with it. Reconstructing prior years is straightforward when the vendor ledgers are intact and painful when they are not, which is one more reason the working paper matters.
A process that makes it painless, and which slip goes to whom
The whole obligation reduces to four habits. Collect the identifier and the HST number on a subcontractor setup form before the first payment, and verify the HST number against CRA's registry. Code every construction subcontractor as such in the accounting system so a payments report by vendor produces the slip amounts. Reconcile that report to the subcontract cost accounts at period-end and investigate any vendor paid from job costs who is not coded. File electronically inside the six months and keep the reconciliation with the filing confirmation. Done this way, T5018s take an afternoon; reconstructed from bank statements in year three, they take a week.
| Who you paid | Slip | Why |
|---|---|---|
| A subcontractor for construction services, including materials it supplied | T5018 | Construction payment reporting; amount including HST, cash basis |
| A supplier for materials only, no labour | None | Goods alone are not reported |
| A consultant or professional outside construction, such as an engineer or a surveyor | Generally a T4A for fees for services | Not a construction subcontractor; ordinary fee reporting applies |
| A worker who is really an employee: your hours, your tools, your direction | T4, with source deductions | A T5018 does not convert an employee into a contractor |
| A non-resident for services performed in Canada | A non-resident slip, with withholding | Different regime; get advice before the first payment |
The last two rows are where the T5018 question turns into something bigger. A slip is a report of what you paid, not a ruling on the relationship, and CRA reads a long list of individuals receiving T5018s year after year, with no HST numbers and no other clients, as a payroll that has not been set up yet. Sorting out who is genuinely a subcontractor is worth doing before the slips make the pattern visible.
What changes the answer
These are the facts that decide whether you file, and how much work it is:
- Whether construction is more than half your business income, measured for the whole business, and separately for each corporation in a group.
- Whether you pay for services or only goods, and whether mixed invoices can be split.
- Your reporting period choice, calendar or fiscal, and whether it has been applied consistently.
- How many subcontractors you use, which scales both the penalty and the identifier chase.
- Whether any subcontractors look like employees, because that is the exposure the slips reveal.
- Whether any subcontractor is a non-resident, which moves the payment into a different reporting and withholding regime.
T5018 filing sits inside the same compliance calendar as holdback tracking, HST returns and payroll for our construction clients; the holdback side is in when tax and HST are due on construction holdbacks, and the full picture of what one team handles for a general contractor is in accounting for general contractors. If you have missing years, our CRA Support work starts by reconstructing the vendor ledgers and filing what is outstanding before CRA asks. A free 15-minute discovery call is enough to tell you whether you are required to file and what the missing years would cost to put right.
