Joe from Company ABC recently received a letter from the Canada Revenue Agency (CRA) regarding missing T5018 slips for 2023, along with a proposed penalty of $15,000. Confused, Joe asked his advisor, “What are T5018s?! I install garage doors—I’m not in the construction industry!”
This scenario highlights a common misunderstanding. While your business may not fit the traditional image of the construction industry, the CRA applies a broad interpretation of what constitutes construction activities. This can expose unsuspecting businesses to significant penalties if they fail to meet T5018 reporting obligations.
Do I Need to File T5018 Slips?
You may be required to file T5018 slips if all of the following conditions apply:
- More than 50% of your business income comes from construction activities.
- You made payments to Canadian resident subcontractors for construction services performed inside or outside Canada.
- The total annual payments to any one subcontractor exceeded $500, excluding GST/HST.
But I’m Not in the Construction Industry…
Even if you don’t identify as a construction business, the CRA may still consider you one if over half of your income-generating activities fall under construction. The CRA generally refers to Group 23 of the North American Industry Classification System (NAICS) for guidance (refer here).
Here are examples of activities the CRA considers construction-related (not exhaustive):
- Air conditioning work
- Asphalt paving
- Carpet work
- Concrete pouring and finishing
- Demolition
- Dry and wet heating
- Drywalling
- Duct and sheet metal work
- Electrical work
- Elevator and escalator work
- Excavating and grading
- Fencing
- Finish carpentry
- Form work
- Gas pipe work
- Glass and glazing work
- Hardwood flooring installation
- Heavy equipment rental with an operator
- Insulation work
- Masonry work
- Painting and decorating
- Plastering and stucco
- Plumbing
- Precast concrete installation
- Septic system installation
- Sheet metal and built-up roofing
- Refrigeration work
- Resilient flooring and carpet work
- Roofing and shingling
- Siding work
- Sprinkler system work
- Structural steel erection
- Swimming pool installation
- Tile work
- Water well drilling
Penalties for Non-Compliance
Failure to file T5018 slips can result in penalties of $25 per day, up to a maximum of $2,500 per slip. For businesses with multiple subcontractors, this can quickly add up to substantial amounts.
Need Help?
If you’re unsure whether your business has a T5018 reporting obligation, reach out to your Welch advisor. We can help you assess your situation and ensure you remain compliant with CRA requirements.
The CRA’s voluntary disclosure program (“VDP”) can provide an avenue to get compliant with overdue filings while reducing the penalties for non-compliance. Your Welch advisor can help navigate if this is the right option for you.
