One ledger, three filings that must agree
Revenue on the T2 should reconcile to line 101 of the HST return, and for a firm that bills non-resident clients, zero-rated sales are exactly the spread between revenue reported and tax collected, a spread that reads as an error unless the working papers explain it. Associate fees deducted on the T2 should have slips or associate invoices behind them, and the T4 and T5 the corporation issues should match what its payroll and dividend resolutions say. Our Corporate Tax Filing work builds each return from the same ledger, so the reconciliation exists before it is requested rather than after.
Recoveries add a consulting-specific wrinkle: re-billed travel belongs in the same place on both returns, grossed up in revenue with its HST, never netted on one filing and left gross on the other. How recoveries run through the books all year is covered under consultant accounting; at filing time the job is making both returns tell that story identically.
The February slip run
Fees paid to unincorporated associates belong on a T4A with the amount in box 048, excluding any GST/HST they charged you, filed by the last day of February. So do referral fees paid to a consultant who sent you an engagement. The details that make the run mechanical, legal name, address, SIN or business number, are collected when an associate signs on, not chased in the final week of February, and late or missing slips carry graduated penalties that scale with the count.
| Payment out of a consulting firm | Slip |
|---|---|
| Salary the corporation pays you | T4, filed through the payroll account by end of February |
| Dividends declared to you | T5, same deadline |
| Fees to an unincorporated associate | T4A, box 048, net of the HST they charged |
| Referral fee to another consultant | T4A as well; small amounts are still fees for services |
| Invoices from an associate's corporation | Paid on invoice; their corporation reports the income on its own T2 |
One timing rule keeps the T2 and the slip run consistent: the T4A reports what was actually paid during the calendar year, while the T2 deducts what was incurred in the fiscal year. An associate invoice accrued at year-end and paid in January legitimately lands in different periods on the two filings, and a working paper that tracks the difference saves the explanation later.
Zero-rated engagements need a file, not a hunch
Advisory fees billed to a genuinely non-resident client are usually zero-rated under Canada's place-of-supply and export rules: no HST on the invoice, input tax credits fully preserved, and the sales still counting toward the $30,000 small-supplier threshold. The return that results, healthy credits against little tax collected, is precisely the shape that draws a desk query, so the file matters as much as the rate: documented evidence of the client's non-resident status, and an engagement letter naming the foreign entity as the client.
Two carve-outs reach consultants specifically. The recipient is whoever the engagement letter binds, so a mandate negotiated with a foreign parent but signed by its Ontario subsidiary is a 13% invoice. And advice in relation to real property in Canada, a site-selection study for instance, can stay taxable no matter where the client lives. We confirm the treatment engagement letter by engagement letter and keep the evidence with the return; where a foreign jurisdiction wants something from you, we flag it as worth professional attention there rather than guessing at it from here.
The principal's T1, and the first spring after the exit
We file the corporate return and the owner's personal return as one engagement, so the slips the corporation issued in February are the slips on the T1 in April. The transition year deserves particular care: a consultant who left employment mid-year had withholding on the salary months and none on anything after, and once net tax owing passes $3,000 in the current year and either of the two before it, quarterly instalment reminders begin. The corporation runs a parallel clock of its own, instalments once its tax passes $3,000, a return due six months after year-end, and a balance that falls due well before the return does for a CCPC claiming the small business deduction. When any filing draws a letter, CRA Audit & Review Support answers it from working papers already on file, because the reconciliations were built at filing time, not reconstructed under deadline.
