The classification test, applied to a roofing crew
The CRA decides employee versus subcontractor on the working facts, not on what the contract says, and construction has been a focus of its underground-economy work for years. Applied to a roofing crew, the questions look like this:
- Tools and equipment. Who owns the compressor, the nailers, the ladders and the truck the crew rides in?
- Control. Who decides which roofs get done, in what order, on what hours?
- Substitution. Can the worker send someone else in their place, or refuse a job without consequence?
- Financial risk. Who pays to redo a valley that leaks in the first rain, and who eats the cost of a slow week?
- Independence. Does the worker carry their own WSIB account and insurance, and invoice other contractors too?
A crew that works only for you, on your schedule, with your equipment, is almost certainly employees, no matter how the invoices are written. The parties' stated intent only helps when the facts themselves are ambiguous. A worker who incorporates does not settle the question either: the same facts get examined, and a one-client corporation created to paper over an employment relationship trades your payroll problem for the worker's personal services business problem.
What reclassification actually costs
If the CRA reclassifies your subs as employees, it assesses the CPP and EI that should have been withheld and remitted, including the employer share and EI at 1.4 times the employee rate, plus penalties and interest, and it can reach back through prior years. WSIB runs its own audit on the same facts, in a rate class where roofing premiums are among the highest published. The workers lose too: expenses they deducted as self-employed contractors can be denied.
Fixing it before a review is far cheaper than after. That can mean genuine subcontract arrangements with subs who hold their own registrations and insurance, or it can mean moving the crew onto payroll properly. What does not work is invoices from workers who are employees in every fact that matters.
T5018: filed on time, reconciled both directions
Because construction is your primary business activity, you must report what you pay subcontractors for construction services on T5018 slips: every sub paid $500 or more in the period, with amounts that include the HST you paid them, filed within six months of your chosen reporting period end. The CRA matches those slips against what each sub reported as income.
Scope matters as much as timing. Materials bought from a supplier are not reportable, because a shingle distributor is not a subcontractor, but a sub who shows up with labour and materials on one invoice is. You can pick a calendar-year or fiscal-year reporting period; we align it with your year-end so the totals come straight off the closed books.
The matching runs the other way too. When you sub for a general contractor, the GC files a T5018 with your name on it, and the CRA compares it to your revenue. We reconcile incoming slips against the books every year, because a GC reporting a different total than your return is exactly how quiet reviews start.
| Slip | T4 | T5018 |
|---|---|---|
| Who gets one | Employees on payroll | Subcontractors paid $500 or more |
| What it reports | Gross wages and deductions | Total paid for construction services |
| HST included | No | Yes, in the reported amount |
| Withholding | CPP, EI and income tax at source | None |
| Deadline | Last day of February | Six months after the period end |
The rest of the roofing tax file
Around those two issues sits an ordinary corporate file that still deserves care. Our Corporate Tax Filing work covers the T2 with the small business deduction applied, roughly 12.2% combined in Ontario on the first $500,000 of active income, CCA on the trucks and equipment, and HST returns that tie to the books instead of to estimates. On HST method, roofing usually answers itself: with materials running a large share of every job, the input tax credits under the regular method almost always beat the quick method's flat rate, so we check the math once and file accordingly. We prepare the owner's personal return alongside, so salary, dividends and instalments tell one story across both filings.
And when a letter does arrive, a payroll trust exam, a T5018 matching query, an HST desk review, our CRA Audit & Review Support answers it from the working papers we built at filing time. Most letters end at the first response, because the classification memo and the slip reconciliation already exist.
