Author Segal LLP

Happy Holidays!

We extend a heartfelt thank you to our clients, associates and friends for making 2019 a wonderful year. We wish you all the best during this holiday season and a happy new year for 2020!

In the spirit of giving, Segal has made donations to two worthy causes:

  • Youth Without Shelter: a GTA-based not-for-profit that aids homeless youth with housing, counselling, and education.

  • Second Harvest: the largest food rescue organization in Canada and global thought leader on food recovery.
Please note our office is closed for the holiday season, effective Deceber 25. We will re-open on January 2nd, 2020.

The 2019 Tax Planner

Dear Clients, Friends & Associates,

As we come to the end of 2019, our tax team has been busy compiling a list of tax planning ideas that may potentially increase tax savings for yourself and your family members. The topics included in this year’s tax planner include:

  • New Tax Rules Affecting
  • Private Corporations
  • Personal Tax Changes
  • Corporate and Business
  • Tax Changes
  • Partnerships
  • Trusts & Estates
  • Key Dates
  • Corporate and personal tax rates

Segal’s 2019 Tax Planner is viewable here.

Should you have any questions or concerns, your Segal advisor can assist you in determining which of these ideas is the best fit for you.

Please do not hesitate to call your Segal advisor or our tax team with any questions about this year’s tax planner.

Thank you,

Segal LLP | Taxation Services

Zero-Emission Vehicles

Since March 19, 2019, companies that purchased zero-emission vehicles (such as an electric vehicle) have been able to benefit from attractive tax incentives. In Bill C-97 (first budget implementation bill of 2019, second reading of April 30, 2019), the Canadian Department of Finance added two new depreciation categories for zero-emission vehicles. Here is an overview of the new measures.

The vehicles covered are motor vehicles (as defined in subsection 248(1) of the Income Tax Act) which are acquired new and ready to be used after March 18, 2019 but before 2028 and which are entirely electric or hybrid vehicles that can be recharged with a battery of at least 15 kWh or that are powered by hydrogen. In addition, at the time of acquisition, the company must not have received financial aid for the purchase from the Canadian government under the federal purchasing initiative announced on March 19, 2019 as part of the budget for acquisitions made after May 1st, 2019.

Eligible vehicles may be registered under Class 54 (30% CCA rate) for passenger vehicles, or Class 55 (40% CCA rate) for taxis and rental vehicles. The inclusion of Classes 54 and 55 is not mandatory; therefore. the company could choose (under subsection 1103(2j) of the Income Tax Regulations) to register such vehicles under Class 10, 10.1or 16 depending on the circumstances.

As with Class 10.1. a limit of $55,000 plus tax applies to the capital cost that is eligible for capital cost allowance (CCA) for Class 54 vehicles. This new limit of $55,000 will be re-evaluated annually.

However. unlike Class 10.1, Class 54 does not include a separate category for vehicles whose cost exceeds the $55,000 limit. In addition, a final recovery or loss must be calculated when a vehicle included in these new Classes is sold. To this effect, subsection 13(7)(i)(ii) of the ITA includes a new calculation for proceeds of disposition. Proceeds will be calculated as the ratio of the capital cost registered in the Class at the time of acquisition (i.e., a maximum of $55,000 for 2019) divided by the vehicle’s real acquisition cost. This will reduce the proceeds of disposition according to the capital cost limit of $55,000.

Along with the new rules on the accelerated investment initiative, vehicles in Classes 54 and 55 may be eligible for an accelerated CCA rate of 100% the first year after acquisition. This measure will be progressively abolished between 2024 and 2028.

Finally, these new measures will affect the Excise Tax Act. The 2019 budget proposes a modification of the GST/HST rules in order to increase the input tax credit limit to $55,000 for businesses that have acquired a zero-emission vehicle eligible for the new rules described above.

As mentioned previously, on May 1, 2019, new business purchasing initiatives were added to these new measures. The Transport Canada initiative should make it possible to obtain a rebate of $2500 to $5000 on the purchase of an electric or hybrid vehicle if the MSRP is less than $55,000 for six-passenger vehicles and fewer, and $60,000 for vehicles for seven or more passengers. Some provinces also offer purchasing initiatives similar to the federal ones.

All in all, these new measures will certainly make zero-emission vehicles more affordable for businesses and will encourage them to make the transition to green energy.

Contributed by Caroline Galipeau. M. Fisc., and Marcil Lavallee. This piece was produced as a part of the quarterly Canadian Overview, a newsletter produced by the Canadian member firms of Moore North America.

Valuation Reports Are Not All Equal

Once it is determined that an independent valuation is needed, business owners and legal advisors are often unsure what the deliverable should be to meet their needs. When a Chartered Business Valuator (CBV) is engaged to act as a valuation expert where there is an expectation of independence , the CBV typically provides an expert report containing an independent professional conclusion. In doing so, the CBV exercises significant professional judgment and employs his/her experience and independent research. Valuation reports prepared on objective basis are defined by the Canadian Institute of Chartered Business Valuators (CICBV) as follows :

Calculation Valuation Report – Contains a conclusion as to the value of shares, assets or an interest in a business that is based on minimal review, analysis and little or no corroboration of relevant information, and is generally set out in a brief Valuation Report;

Estimate Valuation Report – Contains a conclusion as to the value of shares, assets or an interest in a business that is based on limited review, analysis and corroboration of relevant information, and generally set out in a less detailed Valuation Report; and,

Comprehensive Valuation Report – Contains a conclusion as to the value of shares, assets or an interest in a business that is based on a comprehensive review and analysis of the business, its industry and all other relevant factors, adequately corroborated and generally set out in a detailed Valuation Report.

When is a formal report actually required?

The general rule is that if a CBV is providing a value conclusion in writing, the CBV professional standards mandate that it is required to be in a formal report – schedules presented on their own are not appropriate. The CICBV standards do not apply to any type of verbal discuss ion whether it be commenting on proposed values or assisting in a negotiation.

Level of Assurance

When is a Calculation or Estimate report sufficient or when in a Comprehensive report required? In general, the level of assurance provided by each report increases as it moves from a Calculation report to a Comprehensive report. Corresponding with this is the effort and fees required to provide the increase in assurance.

General Types of Analysis and Extent of Work Performed

The difference between the three report alternatives is largely the depth of analysis and disclosure as opposed to the breadth of the analysis or scope of review set out as follows:
Calculation reports are inherently limited in that they involve a simplified approach to valuing a business. An Estimate or Comprehensive report allows for more investigation into the critical value drivers of the business which will provide a clearer indication of a company’s value, assuming the required information is available.

How to choose?

Consider the context and risk of the situation. Who are the users of the report? How likely is the valuation conclusion to be challenged by another party such as the courts, tax authorities or other third parties? Is the exposure of the report low or high? What is the level of information available? The valuation report should be credible for the intended purpose. Each of the valuation reports options and the circumstances when each may be appropriate is as follows :
Retaining a CBV and determining the type of report that meets the needs of all stakeholders involves a number of key considerations, including the nature and size of the subject company,  the level of public exposure in terms of users, how contentious is the matter and the availability of information. As the level of assurance increases, so does the complexity and hence the professional fees required. A formal valuation might not be needed in all situations, but when it does, it should meet the needs of all stakeholders.

Contributed by Michael Frost CPA. CA. CBV, from Mowbrey Gil. This piece was produced as a part of the quarterly Canadian Overview, a newsletter produced by the Canadian member firms of Moore North America.

Tips for Accounting for Restaurants

When you are running a restaurant, it can be easy to focus on the food and hospitality and brush off accounting a,s a secondary task. Like any business, however, you are looking to gain and maintain a profit, and good accounting systems are crucial in order ensure your success . Here are our tips to help you on your way:

Choose the right accounting software

Not all accounting software is created equal. The right system should not only help you track your sales and expenses, but should also help track your inventory.

In addition, choose the right POS system that, ideally, is integrated with your other accounting software. This saves the additional step of entering POS information into your accounting software and will help you keep your reports up-to-date in real time.

Constantly monitor the most important reports

Many different reports will help you manage your business, but the most important are typically your food inventory costs, food sales, beverage sales, and operating expenses. Running these reports on a monthly basis may not be sufficient; you may find it most beneficial to maintain these records and analyze them on at least a weekly basis. A detailed plan and breakeven analysis are also critical to help you understand your costs and how to improve your profits.

Be aware of Industry benchmarks and KPls

Understanding other businesses is as important as knowing your own business in the competitive restaurant industry. Benchmarks help you to know where you stand and where you can improve in relation to your competitors. Stay on top of paying your expense. The restaurant business moves quickly and it can be easy to fall behind if your payables are not organized. Ensure that your bills are cycling efficiently for cash flow purposes, but never make the mistake of paying late. A vendor could refuse delivery if they have not been paid on time, which could be a disaster when it comes to fresh food inventory.

Use a payroll service provider.

Many restaurant managers monitor hours and wages very closely. When it comes to actually paying staff, however, manually keeping track of benefits and payroll deductions can become quite time-consuming, and possibly open you up to liability in the case of payroll errors.

Consult a professional accountant

The right accountant will have expertise in the restaurant business and will help you to analyze your financial information and provide guidance.

Contributed by Carly Matheson CPA,from DMCL. This piece was produced as a part of the quarterly Canadian Overview, a newsletter produced by the Canadian member firms of Moore North America.