Law Times reports this week about ongoing criticism around the federal government’s proposal to nix billed-basis accounting, which lets lawyers and some other professionals exclude the value of work in progress from their income and allows lawyers to defer paying taxes on work until it is billed. This would come about by the repeal of s. 34 of the federal Income Tax Act.
Law Times reports this week about ongoing criticism around the federal government’s proposal to nix billed-basis accounting, which lets lawyers and some other professionals exclude the value of work in progress from their income and allows lawyers to defer paying taxes on work until it is billed. This would come about by the repeal of s. 34 of the federal Income Tax Act.
This would come about by the repeal of s. 34 of the federal Income Tax Act.
The change was announced earlier this year as part of the federal budget, and it recently came under fire by the Joint Committee on Taxation of the Canadian Bar Association and Chartered Professional Accountants of Canada.
Issues could arise in firms both small and large, they say.
“We understand that accountants and lawyers in small practices may have a materially different [work in progress] profile than do other small-practice professionals and other service businesses,” said a recent submission by the joint committee. “In particular, it is not unusual for accountants and lawyers in small practices to ‘carry’ clients for a significant period of time in respect of certain types of matters, perhaps until the matter they are involved in (a divorce, a lawsuit, a consulting project) is substantially or completely resolved.”
True that. Or big firms.
“Many firms must . . . consider how they will amend partnership agreements to reflect the change in tax law. This will take some discussion and consideration to establish what is acceptable for each partnership,” said the submission.
The committee has suggested a longer transition period before the change comes into effect so that those affected can better implement the changes and build them into their accounting systems. They’ve also proposed a de minimis exception for small practices. The federal government may wish to get it done right, not quickly — which means a longer rollout is advisable.
