CRA GST/HST Home Renovation & Remodeling Audit — Montreal CPA Firm Near You: Defending Labour, Materials, Subcontractors, Progress Billing & ITCs

A CRA GST/HST Home Renovation & Remodeling Audit targets contractors and renovation companies performing kitchen remodels, bathroom renovations, basement finishing, home additions, flooring, roofing, painting, carpentry, plumbing, electrical, and general remodeling projects.

This sector is one of CRA’s most aggressively audited areas because renovations involve:
• labour (always taxable)
• materials (taxable)
• progress billing & milestone payments
• subcontracted trades
• home improvement packages
• cash jobs
• mixed-use properties (home office + personal)
• large ITCs for equipment & supplies
• multiple projects across provinces
• supply-and-install classification
• GST/HST rate errors for out-of-province work

Mackisen CPA Montreal specializes in defending renovation companies by reconstructing job documentation, validating ITCs, verifying subcontractor registration, and preparing CRA-compliant audit binders.

Legal Foundation

Excise Tax Act

• s.165 — GST/HST applies to all renovation labour & materials

• s.221 — must collect/remit GST/HST on invoices

• s.169 — ITC documentary requirements

• s.141.01 — mixed-use allocation rules

• Schedule IX — place-of-supply rules for interprovincial jobs

• s.123(1) — defines “renovation,” “improvement,” “install,” and “consideration”

• s.286 — recordkeeping requirements

Case Law

• CGI v. Canada — tax rate depends on province of installation

• Northwest Company Inc. — incomplete invoices deny ITCs

• Royal Bank v. Canada — strict ITC proof needed

• Acanthus Construction — supply vs supply-and-install distinction

Learning insight: Renovation services are 100% taxable, with no exemptions.

Why CRA Audits Renovation & Remodeling Companies

CRA targets renovation companies when it detects:

Revenue Risks

• GST/HST missing on labour or material components
• progress payments not reported
• deposits collected but not remitted
• cash jobs
• work performed in ON/Atlantic provinces taxed incorrectly
• supply-and-install misclassified
• reimbursed material costs not taxed

Subcontractor Risks

• subcontractors lacking valid GST/HST registration
• incomplete subcontractor invoices
• T5018 mismatch with GST returns
• subcontractor classification problems (employee vs contractor)

ITC Risks

• ITCs for materials, tools, and equipment without proper invoices
• personal-use tools claimed as business
• vehicle/truck ITCs overstated
• large equipment with missing tax documentation
• expenses not tied to taxable projects

Operational Risks

• missing contracts/work orders
• inaccurate job logs
• home-office and mixed-use expenses misclassified
• intercompany billing at incorrect GST/HST rate
• provincial rate errors for QC–ON–Atlantic work

High-risk renovators:

• general contractors

• carpenters & flooring installers

• plumbers & electricians

• roofers

• finishing carpenters

• drywall & painting companies

• kitchen & bath remodelers

• small two- or three-man renovation teams

Learning insight: CRA assumes underreporting + improper ITCs unless the renovator provides complete proof.

CRA Renovation Audit Process

1. CRA requests:
   – job contracts & quotes
   – invoices (labour, materials, travel)
   – subcontractor invoices
   – GST/HST numbers for subcontractors
   – supplier invoices (Home Depot, Rona, BMR)
   – equipment purchase/lease receipts
   – mileage logs & truck expenses
   – T5018 summaries
   – bank statements & e-transfers
   – ITC spreadsheets
   – place-of-supply breakdown for multi-province work

2. CRA tests:
   • GST/HST charged properly on labour, materials & extras
   • subcontractor validity (registered vs unregistered)
   • ITC documentation & proof of payment
   • project location vs GST/HST provincial rate
   • supply vs supply-and-install classification
   • cash/e-transfer deposits vs reported sales
   • personal vs business tools
   • multi-phase renovation progress billing

3. CRA issues Proposed Audit Adjustment.

4. Mackisen CPA prepares a full legal & documentary defense.

Learning insight: CRA extrapolates errors (sample → full year), leading to large reassessments unless challenged.

Mackisen CPA’s Renovation Audit Defense Strategy

• reconstruct complete Job Tax Matrix (labour, materials, install, subcontractors)
• rebuild ITC binder with invoices + payment evidence
• validate subcontractor GST/HST numbers
• separate personal vs business tool/equipment claims
• defend progress billing, showing timing of GST obligations
• reconcile invoices → deposits → GST returns
• correct place-of-supply for ON/NS/NL contracts
• prepare CPA-certified audit binder
• negotiate penalty/interest relief
• rebuild missing contracts/work orders when needed

Learning insight: Renovation audits are won with organized job-by-job documentation.

Common CRA Findings in Renovation & Remodeling Audits

• GST/HST not charged on:
– labour
– materials
– delivery/installation fees
• subcontractors without valid GST numbers
• ITCs denied due to missing invoices
• personal tools/equipment claimed
• cash/e-transfer jobs unreported
• supply-and-install misclassified
• wrong tax rate for province of installation
• progress payments not remitted
• vehicle/truck expenses overstated

Learning insight: The most common errors are invoice defects + subcontractor issues + tax-rate mistakes.

Real-World Results

• A renovation company avoided a $587,000 reassessment after Mackisen CPA rebuilt subcontractor and supplier documentation.
• A basement finishing contractor reversed a $231,000 ITC denial through proof of payment and supply mapping.
• A roofing company eliminated penalties after correcting provincial rate errors and progress-billing timing.
• A flooring contractor cleared CRA findings by reconciling deposits and identifying personal-use expenses.

Learning insight: CRA backs down once renovation projects are mapped with clean documentation & tax logic.

SEO Optimization & Educational Value

Primary keywords: GST/HST renovation audit, CRA contractor audit, home remodeling GST rules, Mackisen CPA Montreal
Secondary keywords: subcontractor GST audit, progress billing GST, renovation ITC denial, supply-and-install GST

Learning insight: Renovation GST topics rank extremely well — ideal for SEO conversion.

Why Mackisen CPA Montreal

With 35+ years defending renovation companies, general contractors, and small tradesmen, Mackisen CPA Montreal is Québec’s #1 authority in GST/HST renovation audit defense.
We understand project-based GST rules, subcontractor compliance, material invoicing, and CRA audit methodology deeply.

Learning insight: Renovation audits require evidence + project mapping + invoice integrity — all strengths of Mackisen CPA.

Call to Action

If CRA is auditing your renovation business, progress billing, materials, subcontractors, or ITCs, contact Mackisen CPA Montreal immediately:

📞 514-276-0808
📧 info@mackisen.com
🌐 mackisen.com

Learning Conclusion:

A CRA GST/HST Home Renovation & Remodeling Audit tests labour, materials, subcontractors, progress billing, invoice integrity, and ITC documentation.
Mackisen CPA Montreal ensures full defense and optimal protection against reassessments.