HST On Long-term Billing

Note: (This posting was scheduled for September 25th, but for some unknown reason it did not publish to the blog as scheduled.) 

I received a question from Mandy:

“I'm getting accounts to put through that have a HST amount and a GST amount. For example I recently received an account to put through for a criminal matter that was started a year before the HST.

As the work on the matter was pretty much 50/50 before & after HST . . .  the assistant is calculating the disbursements & time spent on the matter based on when the work was done or the disbursement was incurred (before or after HST).  I'm having difficulty with some of these files that do not meet the 90% rule.”

The solution:

Two invoices – one ending June 30, 2010 and one starting July 1st, 2010 to today.

OR

For one invoice - Run your client’s ledger to June 30, 2010.  Then run the client’s ledger from July 1, 2010 to today.  Compare totals on both ledgers to determine whether the 90% rule applies. If the 90% rule does not apply, calculate 5% GST on 1st ledger total, and 13% HST on second.  Add together the GST and HST, for the total tax on the invoice, and then use this amount to adjust the tax on the billing window.

As always, I invite your comments and suggestions for future post topics. Next week – Billing for a Satellite Office.

Clyde