Why the CRA opens cleaning files
Paying cleaners a flat amount per building, calling them subcontractors and skipping payroll is common enough in this industry that the CRA treats cleaning as a sector worth watching. The label on the invoice settles nothing; the working relationship does, assessed on facts. A payroll examination that recharacterizes a crew is one of the most expensive letters a cleaning company can receive, and it is largely preventable.
The CRA's framework, set out in its guide RC4110, weighs who controls the work, who owns the tools and equipment, whether the worker has a chance of profit and a risk of loss, and whether they can send a substitute. Most informal cleaning arrangements fail it quietly: the company sets the schedule, assigns the buildings, supplies the vacuum and the chemicals, and pays by the hour. That is employment wearing an invoice. The examinations rarely start with the company, either; the classic trigger is a former cleaner applying for EI after being cut and showing no insurable hours on file.
The test, translated into cleaning terms
| Question | Employee signal | Genuine subcontractor |
|---|---|---|
| Who sets the schedule and sites? | You assign buildings and shifts | They accept or decline jobs on their own terms |
| Whose equipment and chemicals? | Yours, from your storage room | Their own machines and products |
| Chance of profit, risk of loss? | Paid by the hour, no downside | They quote a price and absorb callbacks |
| Other clients? | Cleans only for you | Serves several companies under their own name |
| Substitution? | Must show up personally | May send their own trained worker |
What a reassessment costs, and the paper that prevents one
When the CRA recharacterizes subcontractors as employees, it assesses both the employer and employee shares of CPP and EI, usually reaching back more than one year, then adds a 10% failure-to-remit penalty, 20% where it finds the failure repeated or knowing, plus interest. WSIB applies its own similar test with its own definition of worker, so the same facts often bill twice.
For crews that genuinely are subcontractors, documentation carries the day: a written agreement, their invoices, their HST registration where their sales require one, evidence they serve other clients, and a T4A slip reporting fees for services. Cleaning is not construction, so the T5018 regime does not apply here; the T4A is the reporting vehicle. We build that file before it is requested, not after. Where a relationship is genuinely ambiguous, the CRA will issue a CPP/EI ruling on request; more often the better move is to fix the facts, either by papering a true subcontract or by moving the crew onto payroll deliberately, on your own timing rather than an auditor's.
HST: both sides of the business are taxable
There is no exempt side of a cleaning company. Commercial janitorial and residential house cleaning both carry 13% HST in Ontario. Registration becomes mandatory once taxable sales pass $30,000 over four rolling calendar quarters, and once registered you charge every client, including the homeowner hinting at a cash price. Quietly dropping the tax is exactly the pattern that attracts net-worth assessments in cash-friendly industries, and it rarely stays quiet.
Registration also pays. Input tax credits recover the HST on chemicals, equipment, fuel and software, and smaller operators can often elect the quick method, remitting 8.8% of HST-included sales instead of tracking every credit, available while annual taxable sales stay under $400,000; we run the math both ways before choosing. Invoicing needs discipline either way: your HST number on every invoice, tax shown separately, the site and service period described. Commercial accounts-payable departments reject sloppy invoices, and the rejection shows up as slow payment.
The filings, filed together
We prepare the T2 with the small business deduction applied, roughly 12.2% combined in Ontario on the first $500,000 of active profit, T4 and T4A slips that agree with the ledger, and HST returns reconciled to invoiced revenue rather than to bank deposits. Owners who want one accountable desk add the personal return through Personal Tax Filing. That package is Corporate Tax Filing for cleaning companies, prepared by a Mississauga CPA who sees the whole file. And when a CRA letter lands anyway, a payroll examination or an HST desk review, CRA Audit and Review Support answers it from a file that already exists.
