CRA’s action on ‘Carousel fraud’ may harm innocent businesses: Lawyer
He says businesses will pay the net amount of GST/HST to the government. If they collected more GST/HST than they paid, they pay the difference to the government. If they have paid more than what they have collected, they qualify for input tax credit to cover the balance.
Tax attorney David J. According to an article in Canadian Accountants written by Rotfflish, while GST/HST fraud schemes do not involve carousels but invoicing of accommodation, the CRA is also targeting temporary employment agencies. In that industry, “innocent businesses have been caught in the crossfire,” Rotfleisch said.
In these temporary agency plans, Piccolo says, a business would contract the agency for several employees, the temp agency would deliver them, and as far as the business is concerned, they paid for the employees and the employees showed up. Even though the temp agency sent all employees from its own payroll, it still claims it subcontracted for a portion of them. The subcontractor of the temporary agency becomes a missing-trader and does not send the GST/HST. The temp agency fraudulently claims GST/HST, but the business at the beginning of the chain does so honestly.
In that case, the CRA can claim that the fraud involved the entire relationship, and that the employees were allegedly employed by the temp agency, in fact, by the business itself, Piccolo says.
“I’ve seen that kind of situation where you have the end user who doesn’t know what’s going on down the chain. All they know is that those people appeared, or the merchandise appeared, but they necessarily know the specifics of it.” don’t know.”