Personal Services Business

The legislative changes basically removed many of the benefits to incorporating.  The small business deduction was eliminated for PSBs and expenses restricted to the remuneration paid, including benefits, to the “incorporated employee” and those deductions which would normally be deductible from an individual’s employment income.  Even with the restrictions, PSBs still enjoyed a healthy tax deferral through incorporation to the extent the money was left within the corporation.  The result being trapped corporate surplus which we, as trusted advisors, are often called upon to provide guidance.

Purpose

The simplest explanation of a PSB is “but for” the corporate structure the contractor could reasonably be considered an employee of the client. 4  Two exceptions are provided within the Income Tax Act (the “Act”): corporations staffing more than five full-time employees and corporations providing services to, and receiving payment from an affiliated company.  Qualifying based on these exceptions is extremely rare.

Who’s this for?

  • Business Owners
  • Self Employed Individuals