XBert Type: Standard
Accounting Software: Xero, MYOB, QuickBooks
Country Restriction: Canada only
Risk Type: Tax Risk
Business Function: Purchases
Overview
This XBert checks for payments to suppliers who charged you GST/HST but were not registered for GST/HST with the Canada Revenue Agency (CRA) when you paid them. If a supplier was not registered, you generally cannot claim that tax back as an input tax credit. That leaves you out of pocket and can attract a CRA review.
What it does
It reviews your supplier spend over the last 12 months and checks each supplier against the CRA business number register. It looks at two kinds of payments:
Payments applied to supplier bills that include GST/HST.
Spend-money bank transactions paid to a supplier that include GST/HST.
For each supplier, it adds up the total amount paid and the total GST/HST charged, then checks whether that supplier was registered for GST/HST on the date you paid them.
How it works
XBert raises an alert when all of the following are true:
You made a payment or spend-money transaction to the supplier in the last 12 months.
The transaction carried GST/HST (tax greater than zero).
The supplier was matched exactly to a CRA business number, so XBert is confident it has the right business.
That business was not registered for GST/HST on the date you paid them.
XBert deliberately ignores uncertain matches. Only suppliers matched exactly to a CRA business number are considered, so close name matches never raise this alert. It also looks only at authorised transactions, so anything voided, deleted or still in draft is excluded.
The registration check is judged as at the payment date, not today. If a supplier was properly registered when you paid them but has since cancelled their registration, this XBert will not fire, because your input tax credit at the time was valid. It only flags suppliers that were genuinely unregistered when the money was paid.
Example/Use Case
Priya runs a catering company in Ontario and regularly pays a produce supplier, Maple Grove Foods. Over the past year she has paid them bills totalling $8,400, including $1,092 of HST that she expected to claim back on her GST/HST return.
XBert checks Maple Grove Foods against the CRA register and finds the business was not registered for GST/HST during that period. Because the supplier should not have charged HST, Priya cannot claim the $1,092 as an input tax credit. Thanks to the alert, she contacts the supplier for corrected invoices and a refund of the HST charged in error, then adjusts her return before the CRA ever raises a query.
Accounting software
Xero, MYOB, QuickBooks.
Which countries it supports
Canada only.
Processes
This XBert falls under the Purchases business function. To resolve it:
Confirm the supplier's GST/HST status by checking their business number on the CRA GST/HST registry.
If the supplier was not registered, ask them for corrected invoices that do not include GST/HST.
Request a refund or credit from the supplier for any GST/HST you were charged in error.
Check whether you have already claimed this GST/HST on a lodged return, and correct the return if needed.
Update the supplier's contact record in your accounting software so future bills use the correct tax treatment.
Once the records are corrected, mark the XBert as resolved.