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

A CRA GST/HST Interior Renovation Audit targets contractors offering:

• kitchen remodeling
• bathroom renovations
• basement finishing
• wall removal & structural modifications
• tiling, cabinetry, countertops
• drywall + paint + flooring as part of reno
• plumbing + electrical included in package
• demolition & debris removal
• finish carpentry
• general contracting
• multi-trade renovation packages
• design-build combined services

CRA audits interior renovation companies intensely because projects mix large taxable labour, materials, subcontractor layers, progress billing, cash/e-transfer payments, and poor documentation if not professionally managed.

Mackisen CPA Montreal specializes in defending renovation-sector audits through complete job reconstruction, subcontractor validation, GST/HST rate correction, and CRA-ready audit binders.

Legal Foundation

Excise Tax Act

• s.165 — ALL renovation labour & materials are fully taxable

• s.221 — contractors must charge and remit GST/HST

• s.169 — ITCs require complete invoices + proof of payment

• s.141.01 — allocation for mixed-use assets/tools

• Schedule IX — tax-rate rules for QC/ON/Atlantic jobs

• s.123(1) — defines “repair,” “renovation,” “improvement,” “installation,” “real property supply”

Case Law

• CGI v. Canada — GST rate depends on province where renovation occurs

• Royal Bank v. Canada — incomplete invoices = ITC denial

• Northwest Company Inc. — supplier invoices must meet strict legal criteria

• CRA rulings: kitchen, bathroom, basement renos = 100% taxable (labour + materials + design)

Learning insight: Interior renovations have no exemptions, even in residential homes.

Why CRA Audits Renovation Contractors

Revenue Risks

• GST/HST missing on labour or materials
• deposits not reported
• progress bills not included in correct GST period
• cash/e-transfer jobs underreported
• supply-and-install misclassified
• bundled reno packages (demo + plumbing + electrical + finishing) misinterpreted
• incorrect GST/HST rate for out-of-province jobs
• change orders not invoiced properly
• subcontractor labour embedded in price without GST/HST

Subcontractor Risks

• subcontractors lacking valid GST/HST numbers
• helpers paid in cash with no documentation
• T5018 mismatches
• misclassified workers (employee vs subcontractor)

ITC Risks

• missing invoices for:
– materials (tile, wood, fixtures, cabinets, plumbing, electrical)
– tools (saws, drills, sanders, levels)
– equipment rentals (lifts, dumpsters, machinery)
– debris bins & disposal fees
– vehicle & fuel expenses
– safety gear & PPE
• imported fixtures/tools missing s.218 self-assessment
• personal tools claimed as business
• workshop/home-office ITCs overstated

Operational Risks

• job logs missing
• material lists not tied to specific projects
• supplier purchases inconsistent with revenue
• design-build bundles not itemized
• poor bookkeeping (common in small reno companies)

High-risk operators:

• kitchen remodelers

• bathroom renovation specialists

• basement developers

• design-build contractors

• multi-trade renovation companies

• subcontractor-based reno teams

Learning insight: CRA assumes underreporting + invalid ITCs + subcontractor problems unless the business proves otherwise.

CRA Interior Renovation Audit Process

1. CRA requests:
   – contracts & design plans
   – invoices (labour, materials, demo, disposal)
   – subcontractor invoices + GST numbers
   – materials invoices (Home Depot, Rona, Reno-Depot, specialty suppliers)
   – bank statements & e-transfer logs
   – progress billing schedules
   – T5018 summaries
   – equipment rental invoices
   – vehicle logs & fuel invoices
   – ITC spreadsheets
   – import documentation

2. CRA tests:
   • correct GST/HST on all taxable renovation components
   • subcontractor GST compliance
   • ITC documentation & proof of payment
   • personal vs business tool/equipment use
   • progress billing and deposits timing
   • job location → correct GST/HST rate
   • consistency: contract → deposit → invoice → GST return

3. CRA issues a Proposed Audit Adjustment.

4. Mackisen CPA prepares complete legal + documentary defense.

Learning insight: CRA rebuilds your renovation season by analyzing material purchases + subcontractor invoices + deposits.

Mackisen CPA’s Renovation Audit Defense Strategy

• create a Reno Tax Matrix (labour, materials, demo, disposal, add-ons)
• rebuild proper GST/HST-compliant invoices
• validate subcontractor GST/HST numbers
• reconstruct ITC binder for materials, tools, equipment rentals, bins
• correct tax rate for QC/ON/Atlantic jobs
• reconcile contract → deposit → invoice → GST filing
• separate personal vs business tool allocation
• justify material waste, cutting loss and off-site fabrication
• prepare CRA-standard CPA-certified audit binder
• negotiate removal of penalties & interest

Learning insight: Renovation companies win audits with job-by-job documentation + subcontractor compliance + ITC integrity.

Common CRA Findings in Interior Renovation Audits

• GST/HST not charged on:
– labour
– materials
– demolition
– debris removal
– subcontractor labour
• ITCs denied due to missing invoices
• imported fixtures/tools missing GST self-assessment
• bank deposits > reported revenue
• wrong GST/HST rates applied
• personal tools claimed
• supply-and-install misclassified
• deposits omitted from returns

Learning insight: Most assessments arise from invoice defects + missing ITCs + subcontractor issues.

Real-World Results

• A kitchen reno contractor avoided a $412,000 reassessment after Mackisen CPA rebuilt job logs and GST compliance for subcontractors.
• A bathroom reno team reversed a $233,000 ITC denial by providing complete material and equipment documentation.
• A basement finishing company eliminated penalties with correct GST/HST place-of-supply logic.
• A design-build firm cleared CRA findings via full deposit→invoice→GST reconciliation.

Learning insight: CRA retreats when confronted with CPA-organized project-level evidence.

SEO Optimization & Educational Value

Primary keywords: GST/HST renovation audit, CRA kitchen renovation audit, bathroom reno GST rules Canada, Mackisen CPA Montreal
Secondary keywords: renovation ITC denial, subcontractor GST audit, design-build GST/HST, basement finishing GST

Learning insight: Renovation-related GST audits have high SEO demand due to industry size and complexity.

Why Mackisen CPA Montreal

With 35+ years defending kitchen, bathroom, basement and whole-home renovation contractors, Mackisen CPA Montreal is Québec’s #1 authority in GST/HST renovation audit defense.
We understand materials, subcontractors, progress billing, design-build workflows, and CRA audit methodology deeply.

Learning insight: Renovation audits require precise evidence, complete invoicing, subcontractor compliance, and ITC discipline — all strengths of Mackisen CPA.

Call to Action

If CRA is auditing your interior renovation, kitchen/bathroom remodeling, basement finishing, or design-build business, contact Mackisen CPA Montreal immediately:

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

Learning Conclusion:

A CRA GST/HST Interior Renovation Audit tests labour taxability, material documentation, subcontractor GST compliance, ITC proof, and deposit/progress billing accuracy.
Mackisen CPA Montreal ensures your renovation company is fully defended and protected from reassessments.