# Question about subcontracting



## UnknownXV (Aug 3, 2013)

Hello folks,

I'll get right to the question, I'm 23 and I have a friend who has a small cleaning business (he has no employees). He gets cleaning contracts from another woman who specializes in obtaining cleaning contracts and offloads them to other people and takes a small cut. He's been generous and has given me one of the contracts he has from her. 

Sounds a bit complicated and it sort of is, I guess just follow the chain. Her > him > me. I do the work all on my own, he doesn't help me in any way. My question is, can this considered subcontracting work on my end? So far, I've been paid $6,000 for my work this year. It's by month, not hourly, of course. Nothing major, but I need to know if this can be declared as freelance / subcontract work. If it cannot be declared as such, he'd have to hire me as an employee, yes? Neither of us are sure as to the legal and taxation consequences of doing so, it's been nagging at us for a while.. so here I am, asking for some advice.

Also, he's already near his maximum capacity as far as how much he wants to work, but he offered to me if I wanted that he'd get another contract and we could do the work together. Easier for transportation, and it could be a bit fun. We'd split the pay 50/50. Is this also possible to declare as subcontracting work? It wouldn't be much more, maybe another $300 a month. 

Thanks.


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## OptsyEagle (Nov 29, 2009)

Being self employed (sub-contractor) is kind of a grey area. CRA will look at how much control your friend has over your work. Does he require you to work certain days at certain times at a certain place. Does he provide all the equipment and support. If yes, CRA will lean towards an employer/employee relationship here.

If all he does is say; get these clothes cleaned by Friday at 3:00 and doesn't care when you do it inbetween or how you do it, or provide all the equipment, then that would be a typical self-employed relationship.

That is my opinion, anyways.


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## ehrof (May 2, 2011)

Read this:

http://www.cra-arc.gc.ca/E/pub/tg/rc4110/rc4110-e.html

These questions relate to the following elements:

the level of control the payer has over the worker's activities;
whether the worker provides the tools and equipment;
whether the worker can subcontract the work or hire assistants;
the degree of financial risk the worker takes;
the degree of responsibility for investment and management the worker holds;
the worker's opportunity for profit; and
any other relevant factors, such as written contracts.

Let us know more of the details and answers to some of the questions and we can probably provide some feedback. At the end of the day, it's probably a judgement call but you can set up certain things to show more towards sub-contractor vs. employeed.


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## UnknownXV (Aug 3, 2013)

Right, thanks for the speedy response. Let me see if I can answer these:

the level of control the payer has over the worker's activities;

I have to clean a radiology clinic 5 times a week. I do not have to do it at a specific hour. He doesn't help me at all and has no control over how I do it, as long as it gets done. I can go anytime between when the clinic closes, and when it opens the next day. 


whether the worker provides the tools and equipment;

Provided by the clinic. 

whether the worker can subcontract the work or hire assistants;

As in if I could hire someone else to do this? I think I could, just passing it along in that chain right? But I'm sure my friend would want to know if I did. 

the degree of financial risk the worker takes;

None.

the degree of responsibility for investment and management the worker holds;

None besides being responsible for any damages caused at the clinic (I have my own insurance for this though).

the worker's opportunity for profit; and

Well, the profit is in the contract, simple as that. $900 per month. 

any other relevant factors, such as written contracts.

Well as I mentioned, it follows that link where the first women got the contract from the clinic, passed it along to my friend, who gave it to me. No written contract between me and my friend, but there is between the women and the clinic. 

I hope I answered these questions sufficiently. 

Thanks again for the help.


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## OptsyEagle (Nov 29, 2009)

I think you have as good of argument as most for self-employed status (sub-contractor).


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## donald (Apr 18, 2011)

I think your a employee.I run a business almost exactly to what you describe,it is my understanding that if you only have one billing client and no others than you are in fact a employee.I am not 100% sure but this is how i treat my main sub(employee)


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## OptsyEagle (Nov 29, 2009)

donald said:


> I think your a employee.I run a business almost exactly to what you describe,it is my understanding that if you only have one billing client and no others than you are in fact a employee.I am not 100% sure but this is how i treat my main sub(employee)


Don. I think you are confusing the rules around whether you are a Cdn. Controlled Private Corporation (CCPC). There is really no mention about the sub-contractor needing to have more then one contract, with respect to self-employed status.


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## wendi1 (Oct 2, 2013)

This is really a murky grey area in Canadian tax policy. You want to avoid becoming a "Personal Services Corporation" because then you lose a lot of deductions, as well as your ability to be taxed at the small business rate. As well, you want to avoid being seen as an employee, as that loses you even more flexibility and means all of your income is taxed at your marginal rate.

If CRA finds you to be an employee, they will NOT get your "employer" to pay your FIT, CPP, EI, or severance. You will have to pay interest and penalties, though.

The problem with those questions that CRA asks, is that for a lot of us, the "employer" could be seen as either the person you signed the contract with, or the person (or corporation) whose offices you clean.

If you are called by CRA to answer questions on this topic, take a smart lawyer with you - this can get very expensive.


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## donald (Apr 18, 2011)

If you forget to put out the ''caution'' wet floor sign is it you @ fault if the next mourning someone takes a spills(say doctor or patient) and breaks their ribs?
This isn't your question but aside from the tax question,if i were you,i would find out everything about this contract(protect your ***!).
For 6k worth of work(legal reasons)I would want to be a employee(scrap the small benefit you think you would be getting being a sole prop)
You have insurance(damages?) but what kind?I would be scared if there was a ''grey'' area and a law suit ensued.
Something to think about.(seems really murky,id want all the facts written out on a contract)
If something happens,all parties will scattered(you can count on THAT) and you might be faced with a nightmare imo.


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