# Am I considered a "Personal Services Business?"



## bmm07 (Nov 27, 2013)

Hello everyone, thank you for reading my post.

I have just secured a contract through an IT recruiting agency as a contractor/project manager in a bank. The terms of hiring are I have to be incorporated to be able to get the contract. I will also have a few other clients on the side as a source of income. I will work from home as well as in the office while servicing other clients on a day to day basis. 

My question is, will I be considered a "Personal Services Business?" 

Right now, I am the only person in my corporation and I am considering hiring my wife if this is possible.

Would appreciate some advice on this if possible. Thank you very much for your time.


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## Underworld (Aug 26, 2009)

I am in the same boat (IT contractor) and have worried about it too  I know 20 other contractors who don't worry about it at all and carry on without a care in the world.

The CRA deliberately word it very vaguely to leave room for interpretation. This might be to push the worrysome folk into declaring PSB, and to give them more flexibility in judging corporations PSB.

Their documentation reads along the lines of: If you have 5 or more employees, we won't consider you PSB. If a good % of your income throughout the year is from various sources, they wont consider you PSB. I haven't seen any specific numbers for % of income, but I've heard 25+%. Also being able to control your own hours, have a well worded contract that puts you at arms length to the company you are doing the work for, using your own tools, software machine etc...

I also remember reading something about how the CRA look straight through the middle man recruitment agency transparently. They don't see the middle man as a degree of separation.

I'm constantly on the fence as to whether I should or should not be PSB. On one side I could be saving ~15 of my income by not giving it to the tax man, on the other side, if you get deemed PSB, you have to retroactively back pay it plus a punitive penalty :\


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## wendi1 (Oct 2, 2013)

I am in this boat, too. CRA has been deliberately vague on this, which is leading to sleepless nights, for sure. Apparently Quebec revenue uses different criteria, which is just WRONG!!!

Hiring your wife won't make a difference to this issue, but can help with distributing your income to make your personal tax rates lower.

If CRA challenges you on this point, make sure you hire a good lawyer - this can be very expensive, and your agency or your client will not help. From their perspective, this is your problem.

Here is an interesting article on the subject - http://www.agtax.ca/cra/personal-services-business-rules-tax-implications-of-incorporation/.

Note that you are at particularly high risk because you are making decisions on behalf of the client, and supervising employees. You might be normally considered to be an employee.


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## mahmood (Dec 30, 2013)

See this CRA publication for a summary of factors that are considered: http://www.cra-arc.gc.ca/E/pub/tg/rc4110/rc4110-13e.pdf

To summarize a few of the factors, having more than one income stream helps, so does not having to get your vacation approved, being able to work from home, paying for your own computer or other expenses, etc.

Court cases are rare FWIW.


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## wendi1 (Oct 2, 2013)

All anyone wants to know is, how do I structure my business to avoid being called a PSB. And CRA is being deliberately vague on the subject. 

The new law states you will be declared a PSB if without the existence of the corporation, an individual, or a relative performing service on the corporation’s behalf, could reasonably be considered an employee of the would-be-employer. You are not a PSB if you have 5 or more employees.


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## mahmood (Dec 30, 2013)

wendi1 said:


> All anyone wants to know is, how do I structure my business to avoid being called a PSB. And CRA is being deliberately vague on the subject.
> 
> The new law states you will be declared a PSB if without the existence of the corporation, an individual, or a relative performing service on the corporation’s behalf, could reasonably be considered an employee of the would-be-employer. You are not a PSB if you have 5 or more employees.


I don't consider CRA's rules to be particularly vague in this instance. There are so many possibilities and scenerios for them to make a few simple hard black and white rules as to what consitutes a PSB and what does not. Chances are, if one has to ask "Am I a PSB" you probably are 

If you go through the publication I linked above most of this factors can be worked into your contract to help defend non-PSB status.


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