The case for voluntariy HST registering your microFIT “business” | Searching for Green

Let me stress from the beginning that I’m not an accountant and as such, this post is only for your entertainment and thought stimulation :-). So ask your accountant for professional help.

Normally, a sizable 13% chunk of the price we’ll pay on the microFIT solar system installation goes to the government coffers. For a $26,000 install, HST is $3,380 resulting in a final bill of $29,380.  The good news is that it’s possible to get the HST money back. The bad news: you’ll have to work a little for it.

Basically, HST is an added value tax. Usually, when a manufacturer or merchant buys some goods or services, they pay HST to their suppliers.  At their turn, the merchants add HST to the price of what they’re selling. Most of the time, the HST collected from the sales is greater than the HST paid for all the purchases. The difference is government’s money and it has to be remitted to them at regular intervals. If you do the math the HST to be paid to the government is 13% applied to the difference between all the sales and all the purchases, hence the European naming of the similar tax as VAT (Value Added Tax).

This works as described for a regular business, but for our microFIT  solar panel installation there is something important to note. The bulk of our costs are at the beginning of the activity, while the income will come in gradually over a long period of time. What this means from the HST standpoint is that we pay a $3380 as HST at install time, and then slowly collect $363 per year in HST  from our electricity sales to OPA.  Because we collect less HST than we pay in the first year, we will not have to remit any HST to the government. Even better, we will get a cheque for almost all of the HST we initial paid to the solar contractor!

In practical terms, it’s almost the same as if you don’t have to pay HST for your system in the first place! If using borrowed money, you may quickly pay back a part of the loan with the money from your first HST cheque, so you end up paying just $26,000 for my above example.

This money is not totally free, however. The government requires some paperwork to see how you calculate the amount it is owed, so you’ll have to spend a little time to fill the requested forms. From what I’ve read on a forum, for a simple thing as a solar system it may take 10 minutes. But you’ll have to keep your books in order and remit the required paperwork and HST money in time, because mistakes may be costly. Or, if you like such tasks as much as a root canal, better ask your accountant to do it on your behalf and be prepared to pay the price.

If you want to get the HST money I would recommend the following steps:

  • read and understand the information on the CRA GST/HST page, and especially the HST guide
  • set an appointment to your accountant, because you’ll probably want some professional advice. Usually only businesses register for HST, but it’s possible for a simple person to register if they want. Also keep in mind that you are not required to register for HST (only businesses or persons with sales larger than $30,000/quarter are), but instead you want to do it.
  • decide if you want to do the HST reporting yearly or quarterly (more work to do in the future, but you get your refund cheque quicker). It may be even possible to have quarterly reports in the until you get your refund and then switch to yearly reporting. Ask your accountant!
  • decide if you want to file the HST returns yourself, or ask your accountant to do it for you (he may charge you for this, so ask first!)
  • register for HST on the CRA website
  • inform OPA that you are registered for HST, so they know to add HST on the microFIT electricity generation invoices

Your first HST return will be the one where you will get a government refund and as a result they want to make sure you know the rules. The  HST guide indicates that this also means that your first return will be audited, so keep you books in order!

In the end, by registering for HST your cashflow and ROI will improve significantly. In my opinion this overcomes the small price of regularly filing the HST return.

SearchingForGreen

82 Responses to “The case for voluntariy HST registering your microFIT “business””

  • Roger Peters:

    Really useful information. It could make the difference for a many people considering a MicroFIT project.

  • Steve:

    I didn’t register for HST with my microFIT contract application. However, on my first utility statement (which I just received), they want to pay me HST. Now I don’t know what to do. I’ve asked them to remove it – with no response yet. I was hoping to keep my microFIT paperwork to a minimum.

  • icabrindus:

    @Steve: I’m not an expert by all means, but I’ll try an answer nevertheless :-). The way I understand it, the utility is only an middleman between you and OPA. When you apply for microFIT, you are asked to specify if you are registered for HST or not. This information is then passed to your utility so they know how to do the billing. In your case it seems that the information got lost between OPA and the utility. So you may need to call both of them to see where it should be fixed. If it were me, I would start with OPA, since they are the “master” in this game and they may directly order the utility to fix the issue. But you can call them both at the same time, as you may save some time.

    Let me know how it ended!

    • Steve:

      @icabrindus: The OPA simply told me to contact my LDC (utility). Before I could contact them, they responded to my initial request and acknowledged the error. My next statement will not include HST as expected.

  • Mike Stortini:

    Greetings all, I’m asking this same question at various blogs so I apologize in advance for sounding like a broken record:

    I Netfiled my first HST return on 15 Dec 2010 for my new microFIT rooftop PV ‘business’. As of 04 Apr 2011, my monthly call to the CRA while I await some sort of formal reply from them about ‘where is my HST refund?’ goes unanswered.

    Has any microFIT owner actually been paid an HST refund?

    Thanks

    Mike

    • Miles:

      Mike,

      I haven’t received my rebate, and I understand from the auditor assigned to my HST return, they aren’t sure what to do with HST registered business’s on residential properties.

      I saw an article in “The Ontario Farmer” that recommended faxing in your receipts to the auditor assigned to your case, as well as sending in your microfit contract. This proves all electricity is being sold, as if it was being consumed by yourself, the HST rebate wouldn’t apply. I just did that today and we will see what happens!

      Miles

      • Mike Stortini:

        Miles
        Thanks for the update. My auditor stated that ‘the system becomes part of capital real property’ and thus the HST ITC will not be allowed.

        She whimsically added that I’ll be able to add the HST paid to my overall CCA. I told her true, but then I only ‘don’t pay the marginal income tax rate on my $3750 HST which would be about $900….I’d really rather have the $3750 thank you’

        She said my home is my primary residence and as such the system adds value to my home thus the credit dis-allowed at the Ottawa CRA level. I tried to explain that if I sell the house, the microFIT contract is in my name and it would travel with me to my new residence if the next owner did not by the contract from me….

        I countered that it is in place as a business. She stated only farmers would get the ITC because their land is more of a business than my land is (city lot).

        I asked, what if a farmer installs panels on the roof of his personal home?

        After a very long pause I added….

        “Since we live in a land with the rule of law and said tax law should be applied evenly, does your silence tell me that a farmer with panels on his personal home will get a different ITC treatment than a city dweller with panels on their home?

        Mike

        • Miles:

          Thanks for your reply! I wouldn’t give up yet. I will be writing my
          Prov and Fed Mpp and Mp explaining the situation as well. OPG can’t be paying out HST on contracts if we can’t claim the credits. Also as far as being a CCA on the house is not right. The contract can be cancelled by myself at any time, especially if I sold the house and didn’t get any extra for the system. To your comment about taking the contract with you, I don’t believe you can.also, if the system adds value, that would be taxed under the capoital gains allowance after depreciation was factored in.

    • Pamela:

      Hi Mike….. I did receive a refund for HST for the purchase of a 10k system….it only took just about 1 year from the day I signed the contract with the people who installed my panels….. I hope this helped

  • Mike Stortini:

    Miles: I’ll be very interested to see where you go with your letters to your MP and MPP. I have already gone that route and ultimately both levels of government tell me that it is a CRA ruling and they cannot do anything for me. However, please push at your end. Who knows. Maybe more than one voice in the wind……
    My attitude and argument that has fallen on deaf ears: if my money making business venture was making widgets and the only way I could make money was to invest in a widget maker, I could get the ITC for the HST. I would not buy a widget maker and pay HST on it if I could not make money on it.
    My money making business venture is making power and selling it to a captive buyer for 20 years. The only way I can make money at that is to invest in panels and mount them on my roof. I would not buy panels and pay HST on them if I could not make money on it. Yet my ITC for HST is being denied.

    • Steve:

      Speaking of microFIT income and taxes, is there consensus on the which CRA Industry Code to use for filling out the CCA on our systems? I’m leaning towards Public utilities – 221000.

      Thanks,

      Steve

  • Tim:

    This is very interesting – I have my accountant preparing my return now and we are working under the assumption that we can claim the HST back. My understanding is that the solar contract runs seperately from the value of your home and ia not part of your capital real property as demonstrated by the fact that if you sell your house you do not necessarily have ro sell your solar business at the same time (even if that would be the most likely scenario)- Rather you could coose to pay rent or the rooftop space to rthe new homeowner.

  • Mike Stortini:

    I have been contacted by CRA and a representative is coming over for an on site inspection and briefing set for Thursday, 21 April 2011. I was contacted in writing as well as via telephone!!

    From the written communication: “Please have available for review, the following original documentation:
    1. Please complete the enclosed ‘Solar Panel Questionnaire (more on that in a minute);
    2. Contract with Ontario Hydro (their term) showing you are attached to grid. I got Hydro One Networks to send me a 1 line e-mail describing that I am connected to the grid in case my canceled check for the connection charge plus attendant receipt from HON plus the form C are not proof enough;
    3. Feed-In Tarrif MicroFIT Contract with the OPA;
    4. Invoices of revenue received from Hydro/OPA; and
    5. Installation Contract along with all related receipts for the installation.

    I will do a show and tell, complete with ‘pointee-talkee’ along with a 2010 spreadsheet of costs/investment for system……

    That questionnaire: Name;
    Business Number;
    911 address where panels are installed;
    Total size of property in acres (I’m 1/4);
    Is property zoned commercial, agricultural or residential?;
    If property is commercial, what is nature of the business activity?;
    How many acres are used for the business activity?;
    If the property is agricultural, what type of activity is it?;
    How many acres are being farmed?;
    If residential, is there any business activity other than solar energy (so I infer from that question that CRA recognizes solar energy as a business venture)?; and
    Are panels affixed to ground or roof of building?

    The questionnaire reminds me of the house insurance industry a year ago (I lost my coverage because microFIT as a business was an unknown risk) where an old way of business/global viewpoint has yet to catch up to the reality of the street.

    I’ll post results of the visit when they become known.
    Reply

  • Good luck!let I appreciate you letting us know !

  • Mike Stortini:

    Hi. I gave a formal 2 hour briefing to the CRA rep. I even walked thru the whole microFIT chain of events via the on-line record of all the message traffic.

    Bottom line: they are waiting for Ottawa to make a decision. I already said I would plead my case to a tax judge if CRA comes back with a ‘no’.

    The CRA rep did state, under current law, with the system attached to the primary residence, said residence would lose ‘primary residence’ status if CRA allows the ITC for HST and she said then one has a tax (capital gain) implication if one sells the house….

    My reply: like the house insurance fiasco I had last spring with this system, the old set of laws cannot capture the spirit of the emerging new economy of renewable energy……I’m told a decision will come in late May from Ottawa…..

  • Mike Stortini:

    Since I will end up pleading this case in federal tax court, informal method so I can do it myself, here are some random thoughts on how to convince a judge to let a rooftop mounted PV system set-up get to use the HST ITC:

    · The anticipated yearly yield of our roof mounted PV system based on PV Watts is 6312 kWh. This figure, multiplied by the MicroFIT contract price of $0.802 per kWh translates to an expected financial yield of $5,062.00 per year.
    · The nominal payback period for the initial investment of $45,000.00+/- (not including HST) is therefore 8 years and 10.5 months with a MicroFIT contract.
    · Proving that our PV system was bought only because of the money making potential of the MicroFIT program and not to ‘enhance’ the value of our primary residence can be gleaned from our first Hydro One Networks invoice.
    · Our system went ‘on-line’ on 06 May 2010 but our MicroFIT contract price did not come into force until 07 Jul 2010. Our first invoice shows that the first 1024 kWh produced by our system and fed to the grid earned $48.55 plus HST. 1024 kWh represents 16% of our yearly potential yield of 6312 kWh. Put another way, 1024 kWh is 1/6th of our expected yearly yield. Therefore, without a MicroFIT contract, our system would earn us $291.30 a year.
    · The nominal payback period for the initial investment of $45,000.00+/- (not including HST) is therefore 154 years and 6 months without a MicroFIT contract.
    · There is NO business argument that could support the initial capital investment unless the provincial feed-in-tariff existed.
    · Our expected yearly yield of $5062 will produce $658.06 in HST per year.
    · Our system can be expected to produce $13,161.20 in HST over the 20-year contract price.
    · Although the CRA deems our initial HST ITC of $3,700.00+/- somewhat onerous to honour ‘up front’, the net gain to the Government of Canada over the 20 year contract period is $9,461.00+/-.
    · The Government of Canada would realize the net gain about 5 years and 7 months after system and MicroFIT contract commissioning.
    · If just 10,000 other roof mounted MicroFIT systems were to collect HST, the net gain to the Government of Canada over the 20 year contract period would be $94,612,000+/-.
    · Alternatively, the CRA could simply let our ITC of $3,700.00+/- be reduced by the amount of HST collected until such time as said ITC is exhausted, much like the CCA technique as it applies to our MicroFIT investment.
    · Under this alternative, the Government of Canada would lose nothing in the short term and gain an HST income stream from every rooftop MicroFIT business.
    · Finally, I propose a line item ‘exclusion’ to the existing tax code that prevents capital from being attached to the roof of my primary residence. Informally, the CRA understands that the PV system on my roof is a viable business concern. The current tax code simply prevents capital being attached to ones principle residence.
    · My proposed change, to reflect the looming reality of an emerging green energy economy:
    o An exclusion to section ??? (?) (?) of the act applies to any capital attached to an individuals primary residence for the sole purpose of producing renewable energy AND selling all of the produced renewable energy to the existing electrical grid under a provincial feed-in-tariff contract.
    o For purposes of applying for and gaining an HST ITC, the individual is legally bound to collect and forward HST until such time that the applicable provincial feed-in-tariff contract is terminated.

    Comments or thoughts most welcome.

  • Lorne WHITE:

    What would CRA say to someone who used their 2-car garage, located on their principal residence, for a business?

    Wouldn’t they allow that ‘business’ to depreciate the garage separately from the home? Upon the sale fo the principal residence, they would likely evaluate the garage separately and apply an appropriate capital gain to the business property alone – the garage.

    They would also obviously allow the business to register for HST.

    Why does ‘mounting’ removable business equipment on a principal residence somehow create all these problems?

  • Lorne WHITE:

    Please explain how your home insurance problem settled.

    Did you simply ask your broker to find you another company with better coverage appropriate for microFIT? I know of at least 2 strong, stable, mainline Canadian companies offering such coverage.

  • Mike Stortini:

    Lorne: we did get coverage from a firm in Toronto that was much more reasonable than the team that gave us coverage locally but at a very high rate. That all said, it is my understanding now, via my broker in the GTA, that the industry is on-line with this now and that coverage for us at renewal time in Sept will simply be 50 cents per $100 of value ($50 per $10,000).

    • Bill:

      try a quote from North Waterloo Farmers Mutual – they seem to get it and at a reasonable price. They extended my home liability coverage to include the solar (10K ground mount on another property) and i also have loss of income and replacement coverage for about 300 a year.

  • Bart denOuden:

    Lorne, my system is mounted on the roof of a shop in my back yard on a 1/2 acre property. If they every manage to clarify this situation I will be happy to share with you all.

    Mike, although it wouldn’t be my first choice I can see your suggested alternative above, could make some sense.

    I’ve spoken with my auditor three times now still nothing.

    The end of May has come and long gone, does anyone have any news on this issue?

    Also, I’m one of the lucky guys who has bought and paid for the entire system and now I’m unable to get a connection. Is anyone aware of a group / organization talking about a class action on this?

  • Lorne WHITE:

    Where are you located Bart? Have you asked your LDC their exact reasons for rejecting you?

    I originally guessed that an LDC might refuse to accept microFIT power, because their lines might be too weak in that area. It seems fairly obvious that the microFIT power doesn’t go ‘all the way back to Niagara Falls’ but to the closest consumer – ususally the home of the microFIT! (Imagine a rural microFIT at the end of a country road with only 1 neighbour 500m away. Where can that power be used when the microFIT home is not consuming enough?)

    However, I was told recently by our LDC, Canadian Niagara Power, that the issue of whether they could accept a microFIT’s production, was related to the transformer near the property. This would determine whether they charge $300 or $3000 for upgrading their system to accept the microFIT’s production, in either rural or urban locations.

    Any other ideas on connection issues?

  • Mike Stortini:

    As of today, 24 June 2011, still no word from CRA/local CRA office/my local MP on status of HST refund.

    Also note: I have asked, as have many other people in many other jurisdictions, the following (similar) question to the local provincial conservative candidate:

    “I have 19 years remaining in a legally binding contract with an entity that represents the province of Ontario. Your team pledges to eliminate the GRA and dissolve the OPA. If your team wins, will a new Conservative provincial government follow the tradition of English Common Law and honor existing FIT/microFIT contracts?”

    May I suggest anyone with a FIT or microFIT contract ask that question of their local Conservative candidate?

    No one has ever received a reply. Therefor one could construe no reply to that question as a reply. Everyone ‘assumes’ that a huge lawsuit would follow. Well, the contract payments would stop flowing. Who would organize the lawsuit? Who would fund it?

    • Lorne WHITE:

      Mike:

      That’s a good idea to write to PC Ontario candidates about what they’ll do with existing microFIT contracts.

      I talked with our candidate in the Welland Canal riding yesterday, and he assured me that, whatever they do with the FIT and microFIT programme, they will honour Already-Granted-Contracts.

      (This reminds me of Chretien when he cancelled the Toronto Airport contract that Mulroney’s government had spent years planning, shortly after the Liberals won in 1993. That cancellation cost the people of Canada $93M which the courts awarded under English Common Law to the crew who had the ‘Mulroney contract’ broken by Chretien!!!! Hudak may disagree with what McGuinty has done, but he’s Not going to waste Ontario money when that’s what he’s been accusing McGuinty of doing.)

      • Mike Stortini:

        Lorne

        Glad to hear that at least one (1) PC candidate is willing to answer that question. I’m very interested to see if anyone will push this issue locally and what reply they end up getting.

        Mike

  • Bart denOuden:

    Lorne, I’m located on the north east corner of the city of London, I can see the welcome to London sign from my back yard if I stand in the right spot. My LDC is Hydro One. The reason they sight for not being able to connect me at this time is a lack of short circuit capacity at the distribution / transmission station.

    Friday June 24th I finally recieved an email from my MPP with some details on the upgrades they claim to be working on. In my case it’s scheduled for the Clarke station for completion April 2012, which isn’t great but it’s better then not having a date or any clear indication that the upgrades will happen.

    Mike, I agree with you and will be emailing the local Conservative candidates with the same question. I would add a question around the upgrades to Hydro One’s network

    Thanks for all the feed back, I’ll keep you posted.

  • Bart denOuden:

    Gent’s here is a copy of the letter from my MPP on the system upgrade schedule. Not sure if this covers everything or only a portion.

    As you are aware, as a result of the success of the microFIT program the number of applications outpaced needed upgrades to the electricity grid. Our government remains committed to the long-term success and sustainability of this program and we are working to connect as many microFIT projects as quickly as possible. We are making progress – Hydro One is currently upgrading transmission stations that will allow hundreds of projects to connect to the grid. We are also working with Hydro One and the Ontario Power Authority, as well as stakeholders, on a range of innovative and technological solutions that will enable more project connections. In the near future, Hydro One will send out letters to microFIT project proponents who have a conditional offer with the OPA but do not yet have an offer to connect from Hydro One. These proponents were informed in February that connection to the grid must wait until technical and capacity issues are addressed. The upcoming letters will provide a general update that Hydro One and the OPA continue to work on a range of solutions to help connect proponents unaffected by the transmission station upgrades. We will continue to update participants on our progress. Over the summer we will provide more details about the innovative solutions we are working on to connect additional constrained projects. These measures will help us to continue to deliver on our plan for clean, renewable energy for Ontario. The OPA and Hydro One worked closely to prioritize the stations that should be upgraded. On April 7, 2011, 10 initial stations were identified for upgrading:
    Station NameRiding Expected Completion
    KingsvilleEssex August 2011
    KentChatham Kent EssexSeptember 2011
    Port Hope Northumberland-Quinte WestJanuary 2012
    BirchThunder Bay-Atikokan April 2012
    CaledoniaHaldimand-NorfolkApril 2012
    ClarkeLondon-Fanshawe April 2012
    KeithWindsor-WestApril 2012
    LongwoodLambton-Kent-Middlesex April 2012
    NeboNiagara West-GlanbrookApril 2012
    GoderichHuron-BruceJuly 2012

    Again, I truly understand your frustrations and difficulties and I appreciate your patience as we continue to work to connect your renewable energy projects and to find solutions to the technical issues currently impacting your ability to connect. It continues to be a highly beneficial program for Ontario and I look forward to the day when you are all generating electricity for the benefit of this great province.

  • Mike Stortini:

    Bart
    Thanks for sharing that info.
    Mike

  • Miles:

    Folks, I’m starting to get a bit antsy for our hst credits! I’ve already contacted my MP (conservative) twice, and he has forwarded my emails to the Minister of revenue. to follow up, i also emailed the minister of revenue.

    I suggest we all email the minister of revenue (it only takes a couple minutes) and outline our situations, how their delay is causing undue hardship on us, and request a positive decision as soon as possible. emailing your local MP helps, but the more voices at the decision maker will hopefully get some attention!

    Miles

  • bob:

    What is the final decision on the ITC-HST refund for solar PV systems from the CRA? Can anyone give an update?

    • Mike Stortini:

      Still waiting, have just sent another e-mail to my MP to book a sit down to discuss what case I would bring to Tax Court (Informal method) if the bureaucracy insists on not updating sections 204 & 206 of the tax code……..

      • bob:

        I was under the impression that a ruling from the CRA was due out by the middle of August, at least that is what is on the Cansia website. Have they heard anything?

  • Miles:

    I received a letter from the office of Peter Braid MP Waterloo, that a decision will be released in the very nesr future. that was sept 6.

  • icabrindus:

    For everyone interested, CanSIA still tries to push the issue to a (hopefully favourable) resolution. The last update on their website http://www.cansia.ca/microFIT_HST is dated on the end of June, but you may call the number listed there to find if there’s anything new. This seems to add some more weight to the argument, so you may want to mention it in your letters to your MP/MPP.

  • Mike Stortini:

    I finally had a face to face with my local MP.

    I read out loud to him my proposed plan of attack if I should have to go to tax court in Toronto (informal procedure) as I have had NO reply from CRA since April.

    I also read out loud to him my proposed fix to section 208(1), 208(4), etc of the actual tax code (same proposed fix that I had e-mailed to his office last April).

    I had asked for an actual copy of the tax code for the meeting be available, one was not available as one is told all items available off the web.

    I instructed him that all items off the web have a legal disclaimer attached. If I am to walk into a tax court, I need the actual, legal, full, complete text of the tax code.

    As I stated in April, the CRA (after their 2 hour on site inspection/briefing) verbally agrees that I have a genuine business concern….

    My proposed fix to section 208 (1) and 208 (4):

    o An exclusion to ss 208 (1) and (4) (para 170(1)(a.1) of the act applies to any capital attached to an individuals primary residence for the sole purpose of producing renewable energy AND selling all of the produced renewable energy to the existing electrical grid under a provincial feed-in-tariff contract.
    o For purposes of applying for and gaining an HST ITC, the individual is legally bound to collect and forward HST until such time that the applicable provincial feed-in-tariff contract is terminated.

  • Joyce:

    I as well have been waiting to hear about the HST refunds for solar panels purchased and installed last year. I just heard yesterday from my CRA rep that it hss finally been approved to pay for HST on solar panel installations through the MicroFit program (if you registered). She also told me that we are priority to get our files reviewed and completed now that a ruling has been made. Finally!

  • Mike Stortini:

    Just got a call from CRA. We will be getting our refund as the case is now ‘solved’ in our favor.

    • John Gagnon:

      I had my project approved by OPA and an offer to connect from Hydro One before I even went ahead with having my system installed. I first applied in January of this year and was officially connected to the grid on July 15th. Having already been a registered business from my home, I just used that number to register my micro-fit project for HST. My first payment at the end of September and my next 2 payments all have the HST added. So you are telling me that I can claim the $4274.80 that I paid in HST for my system? Please tell me how to go about it!

      • Joyce:

        I have received back the HST I paid on the solar panels we installed. I simply claimed it as an input tax credit when I completed my HST remittance form. I am assuming you may need to submitted an amended HST return for the time period when you paid for the solar panels & the HST on them. The HST you paid is considered an input tax credit on line 106.
        Hope that helps!

      • Mike Stortini:

        John: Yes you can claim that HST as long as you are charging HST on the power you sell to the grid. Joyce who just replied has the tech detail. I did it all on-line for the first time last December. Once the CRA understood that the PV system on my home roof was capital PERSONAL property, we got our $3700 back. So anyone doing it now for the first time will not get the delay that was induced by the CRA a year ago.

  • John Gagnon:

    Thanx for the replies. I just received my HST forms for my business that the solar panels are registered with. I am on a 12 month reporting period, that ends at the end of this year. They also sent me my netfile password, so I guess after I get my statement from Hydro One for December, I will report my total HST that was paid to me, then declare the $4200 as an input tax credit and they will refund the difference……….correct?

  • John Gagnon:

    Thanx to people like you, all of us will benefit. All your hard work has made it easier for all of us to finally get what should have been obvious. Now the whole future of Micro-fit is in jeopardy due to some other lousy government beaurocrat trying to cut the rates. If these cuts are drastic, not only will most people not be willing to look for financing for new projects, most of the new installers that are giving great deals, won’t be able to survive.

    • Mike Stortini:

      John, one of the great by-products of the internet is that experienced based knowledge is shared instantly with the resultant ‘multiplier effect’ of efficiency……

      I think the intent of the bi-annual rate review is to keep the initial stipulated (by OPA) “9 year pay back period” in place.

      As hardware costs have gone down about 15% in the past year or so, one should expect to see a lower initial capitol cost and hence a shorter than 9 year pay back period.

      The new paid rate will (hopefully) still provide the same ROI as the current rates do.

      When my system was specified two years ago, the rate of ‘about’ $8.50 a watt was standard.

      Hardware costs have come down since then.

      If current quotes for roof-top PV systems are still $8.50 a watt (I really do not know), then installers have not dropped installed prices because they have no incentive to pass on dropping hardware costs if the current rates of payment are maintained.

      At least that is the theory behind it all.

      Perhaps 10 years from now, all new homes will require pre-wireing for such systems and hardware costs will probably be half of what they are now, etc.

      The German model that was the basis for the Green Energy Act is now 22 years old and it also started with very hi rates for early adopters.

      The only real solution: institute a true worldwide carbon tax as per Dr. Joseph Romm’s recommendation in “Hell and High Water” (HarperCollins 2007)……

  • John Gagnon:

    My installed cost for a 5.75KW roof mount was $5.72/Watt, so I guess prices have come down with some installers. I had to shop around quite a bit to find that price. Some of the older installers were charging up to $10!

  • John Gagnon:

    Hey, only thanx to guys like you that “were the first pioneers” If people read and research before they sign on the dotted line, they can save a lot of money. The “New Guys On The Block” will give you a system far below the price of the same system from an established installer. Unfortunately unless we keep supporting the new installers and keep the competition up, the new guys won’t be able to keep their heads above water for too long. What would you rather have? A system like mine with WSL Monocrystaline 240w SolarPanels and Enphase D380 Microinverters all installed using UNIRAC Aluminum Racking, at price of $5.72/W or maybe the same panels on the same racking using a central inverter for $8.50-$10/W
    If you do the research first, you will realize what I’m talking about. There is actually an online service that will put your project out for bids to all of the installers in your area at no cost to you. I’m not advertising for them or anybody, I just hope that forums like these will help everybody get the best bang for their buck and bring costs LOWER and LOWER. Just imagine a buck/W *S*

    • icabrindus:

      Hi, John!

      Feel free to mention other websites if you want to, I don’t have anything against it as long as they are related to the topic and can be useful for others.

      Admin

  • John Gagnon:

    If you are looking to get quotes in your area for a solar installation, try this link: http://www.primesunselect.com/. They do all the work for you at no cost. I used them and saved over $10,000.00 dollars!

  • Roman:

    I have a question about reclaiming the HST paid on my Solar PV system. I had my system installed in the fall of 2012 and paid about 7000 HST. I started producing power but did not get a cheque from OPA until January 9, 2012. So for 2011 my revenue was 0.00. Even though I have no revenue on sales in 2011, can I still claim the rebate of $7000 that I paid in HST? Do I claim the HST on line 110 of the paper return?

    Thanks in advance.
    Roman

    • Steve:

      I can’t comment on the HST question since I opted not to register my smaller PV install. However, I believe your first payment counts as income earned in 2011 despite recently receiving the money in 2012. I did that for my fall 2010 install.

      Regards,

      Steve

      • Roman:

        Thanks. I’ll do that. I’ll submit the HST on what was invoiced in 2011. And them ask for a refund of my HST paid on equipment.

    • Shawn:

      Roman:

      The Canadian Revenue Agency will require that you use an accrual basis for you accounting, not cash basis. This means that you claim the revenue when you earn it, not when the LDC gets around to paying you. Your 2011 revenue should therefore be everything you earned up to Dec 31, 2011. You can calculate that ahead of getting the actual cheque, if you had recorded the kW generated from your smart meter – not the one on the inverter, which is likely a different amount. If your local utility reguarly reads the meter on the same day each year, you can go with that date as long as it’s consistent year to year.

      You should also realize that you can claim the HST paid on all of the various costs incurred to generate the revenue. If you drove to meet with your installer 3 or 4 times – the HST on the gas, as a percentage of total km driven could be claimed. If there were additional electrical inspections or insurance fees where you paid HST – claim the HST on those as an input tax credit. If you bought a new computer to monitor the system and paid HST…..You are running a Sole Proprietorship Business now – invest in a good book like:
      Wealth Without Risk for Canadians by Charles Givens (Hardcover – Jun 1992)
      At Amazon : 3 new from CDN$ 29.95

      and don’t forget to claim the HST on the book as an Input Tax Credit :)

      Shawn

    • Bart:

      Hi Roman,

      You most certainly should get your HST back for what you paid on the system in 2011.

      My situation was even more extreme, my system was built in 2010, I applied for my HST rebate in the spring of 2011, it was contested but eventually in October of 2011 they paid me back the full amount claimed even though I had no connection at the time due to Hydro One connection issues. The connection just came through at the beginning of Feb 2012, so I show no income on my HST return for 2010 or 2011 but will start to show when I fill out for 2012 next spring.

      Bart.

  • Louie Tzavelas:

    Industry code: What are people using?

    What % of home use does a solar project use. I have an office and computer room that all of my monitoring is in. I run my business out of it. It repressents 6% of my home floor space, but the panels cover more then 30% of my roof.

    My understanding is that we can use class 43.2 for CCA. Is this correct and if so do we include the HST in the cost of the panels, or is this number pre tax?

    One last question if you can. My understanding is the max write off for the year using CCA can not exceed the amount of money you made. For example I could write off as much as $5000 in CCA but I only made $1000, so that is the max I can write off, I can’t generate a bigger loss by putting the full $5000.

    • Bart:

      Louie,

      I hadn’t thought about trying to claim a portion of the other property costs associated to the panels, I will be interested to see responses on this. For my part I was just planning to claim the additional cost of my home insurance and the direct interest on the loan associated with the panels the CCA and the cost of the meter.

      Class 43.2 is the correct CCA class from my research and I’m pretty sure you would exclude the HST when calculating CCA, that would be a double count in CRA’s eyes, from their perspective you should be claiming the HST back via HST process.

      As for your last question, CCA can only bring you to zero, it cannot push your business into a loss, however, you carry forward what CCA credits were not used this year to future years indefinitely. So we should all show a zero profit against the installations (from a tax perspective) until the full CCA is used up – should take about 9 years if OPA calculations on the system payback is accurate less opex costs – only time will tell.

  • Hi, I finally received my HST rebate this week. I originally had applied for it Jan 9th so it took almost 2 months. I got everything back that I applied for with no questions asked. I am not sure about any of your questions Louie, maybe I can answer some of them after my accountant gets done with my taxes this week.

  • Louie Tzavelas:

    Industry code: Any suggestions I found one in turbo tax but I can’t find in on the cra web site?

    It’s 221119 has anyone ever found out what it should be?

    Has anyone claimed property costs associated to the panels in the past? My numbers are so small that my CCA brings me down to zero without any other write offs but I thought if I get it started now in 10 years it will just be easier to keep it going when I really do need it.

    Thanks again.

    • Pamela:

      That is the code I found on HnR block as well

      • Pamela:

        When I get my results with the program …. it shows a $30000.00 loss…… hence the reason I haven’t filed yet….. my system cost me and my hubby 82900.00….. and I lose 50% in the first year … what a crock or crap that is….. I’d rather use the class code of 43.1 – 30%…. and carry forward much more……. but that’s just me

  • Shawn:

    Some answers for Louie; These are from a normal small business perspective, assuming you are running a sole proprietorship.

    An allowance for your home office could probably include a percentage of the space used by the panels, however I would not state the case that way to CRA. Normally, the proportion of a home office should be based on the floor space of the area used for an office divided by the outside perimeter of the living space of your home, ie. do not include the garage. For a home based business this percentage should be between 20 and 25%. Less than 20% it’s not worth doing the calculations, and more than 25% is a red flag at CRA. In my case my spare room where I keep my desk & computer etc, works out to be 23.6% of the floor space. I’ve used this method since 1993 for various small businesses with no problem.

    I then track the total heat, hydro, mortgage interest, property tax, internet & telephone fees for the whole house and divide by 23.6%. In Turbo Tax, Form T2125 under “Calculation of Home Business Use of Home” on pg 3, you just enter the floor and office areas in square feet or meters, and the total numbers from the above costs, and TurboTax does the math. It then dumps the value back up onto pg 2 on line 9945. This can also be a carry forward for future years. You can do likewise with the vehicle you use to conduct business.

    Very important – make sure you claim the interest on your mortgage only. No Principle. If you include the principle paid over the year, CRA will deem the business to own part of your house – If you ever sell the business or your home, you will have a hell of a tax bill to pay and it will be very messy. Claim a percentage of the interest paid but not the principle.

    For me, TurboTax has actually used the CCA (Capital Cost Depreciation) to reduce my Business Income to less than zero – which is then set against my T4 income (from my employer), effectively reducing my net income on the T1 and adding to my overall tax refund. I’m not sure this is proper in the eyes of CRA, but it’s what Turbo Tax is doing under the 43.2 CCA category.

    Cheers

    • Pamela:

      I have read, that your first year should not either be a profit or a loss… I’m using HnR Block…. how the heck do you do that….. cuz everytime I do it, it shows a $30,000 loss…….. what the heck….. my system cost me $82900 at purchase…. and I have to depreciate it 50% in the first year…. and lose 30,000.00 cuz the next year is 41,000…….. I think that is a rip off……Wish I knew this crap before I suffered through this stupid solar panel bull crap……… Wish I never had them….

      • Dave:

        Pamela, a start up business usually operates at a loss for the first few years and for tax purposes this is a good thing. Depreciating your solar panel as per your tax program means nothing other than you can claim that loss as you start to make an income which is also a good thing as you don’t pay income tax on that loss. You are writing off the cost of the panels to make a profit. It does not mean your panels are worth that value, it just means the max amount you can write off against your income to save taxes. Also these losses can be carried over to future years as you wont need to use the full amount in the first couple years. All this is done automatically if you use the same tax program year after year and import you previous years tax file.

  • Louie Tzavelas:

    Thank You, for all the information. I’m going to claim the 6% of my floor space for the business even thought it dosen’t seem like much. If they find any problems with it I’d rather know now.

    Thanks again, just sent off return via Netfile.

  • Dave Fadden:

    Hello,

    I’m not sure if anyone still checks this or not. I read through all the posts with the anticipation of a murder mystery…Would the HST get paid or wouldn’t it! Glad to hear it worked out in the end particularly because I’m in the same situation. I submitted my HST claim near the end of February for my roof mount 10kw microFit system and I have yet to receive my cheque. I’m wondering if anyone has a direct number for someone at the CRA that would deal with this.

    Thanks,
    Dave

  • Consistently claiming a loss in your business is a sure fire way to get audited one day.

    A business has to have a reasonable expectation of turning a profit, otherwise it can be seen as a way to avoid taxes.

  • Shawn:

    Dave Fadden:

    I claimed the HST during February on the solar system I installed on my home in Oct 11. The claim went to the CRA Hamilton office and I received a letter from them requesting some detailed info, such as a copy of the contract, receipts, etc. which I furnished them. I also prepared a detailed letter describing each receipt, what it was for, the amount paid and amount of HST charged. This claim was offset by the two months of payments from my local Hydro company, where they paid me HST. It was handled quickly and efficiently and I received a big fat cheque from Mr Harper by Mar 22. The contact at CRA is:

    Fred Dunstan, Audit Division,
    Tel 905 572 4033, toll free: 855 572 2318.

    Good Luck.
    Shawn

    • Dave Fadden:

      Hi Shawn,

      I did finally receive my rebate cheque at the end of June. I called the HST people after posting this message and they said my claim was not processed because I put down the wrong reporting period. I resubmitted my claim on line and had it within a couple of months. It too was a big fat cheque. :-)

      Dave

  • Well it’s that time of the year to file the GST/HST report for 2012. I have all my Hydro One receipts for my earnings and what GST I was paid on them. Does any body have any ideas on what, if anything can be deducted from the total GST I was paid by Hydro One to lower what I will have to pay to CRA?

  • Dave Fadden:

    John,

    You can claim all the HST that you paid for your system. If you have not received the form from the HST people with your “access code” for net filing then you have to give them a call. It’s all done online. Just enter what you paid out and what you collected. You won’t have to pay back anything that you collected for this year and you’ll get a refund for the difference. It’s very simple and a nice chunk of change. Next year will be different. The process is the same but you won’t have paid anything so you’ll have to send them a cheque for what you were paid by Hydro One. I’m in that boat this year.

    If you have any questions feel free to e-mail me at spareroom@execulink.com

    Dave

  • This is my second year, I have already received my “nice chunk of change” last year. My question is, what can I claim against it this year?

  • Dave Fadden:

    Oh gotcha. You’re in the same boat as I am. As far as I know you can only claim any HST directly related to your system. If you had to buy any parts or supplies, service etc otherwise you’re on the hook to pay back everything that you collected from Hydro One.

    Dave

  • Mike:

    You can claim the HST that Hydro One charges you for the monthly service fee. Thats about it for my reduction of all HST collected (3rd year now).

  • Shawn:

    John:

    Look back at my posts from last Feb 20 to Roman and March 8 to Louie in 2012. Unless there has been repair issues with your system, you will probably have a zero input tax credit and have to remit the total amount of HST paid to you by your LDC. Not Good.

    The better way, and keeps more money in your pocket, is to operate this as a sole proprietorship business and claim some normal business expenses for operating the system. I’m sure it has cost you time and money – your posts are proof of that! Claiming the HST back is the easy part, but now that you have this revenue coming in from the LDC how is that personal income being reported to the feds? That revenue needs to be brought into your personal income as a Self Employment; Business Income – Line 162 & 135 of the T1. That gets added to your regular employment T4 or Retirement income, and income tax will be due to Mr Flarety. You will not get a T4 slip from your LDC for this income – but I’m sure it can & will be tracked against your SIN number if you don’t report it – that’s illegal. If you didn’t include this revenue in last years income, then you really should do an amendment to your 2011 return and make sure the tax owing is paid.

    The amount of paperwork and detailed tracking of this stuff is up to you, but for me after many years it’s almost enjoyable. The objective here will be to reduce the amount owing as much as possible by claiming normal business expenses as I wrote about last Feb & March. I call it rescuing taxes. See above before going on.

    For example: I assume you have a computer for monitoring the system daily, tracking your profits & depreciation, submitting the HST claim – let’s say you had to buy a new, faster one and pay internet fees to monitor the system remotely. A portion of both should be an allowable claim – but there are specific rules that you need to follow. I would not claim 100% of them because you probably use them mostly for other – non-business stuff. I would use the percentage of my home office used for business (22% in my case), so if I bought a new computer for $1000 + $130 HST, I could claim ($130 X 0.22) $28.60 as an ITC against the HST collected and on my Income Taxes form ($1000 X 0.22)$220 as a business expense. Every year – same thing. A word of caution here: A complete new computer system is written off differently than if you buy it in parts – a system must be depreciated over several years, while parts are a 100% one time write off; make sure you learn the rules. Get the idea?

    I suggest putting a spreadsheet together that you can use to track your monthly expenses that can legitimately be claimed as a business expense. It’s then easy to summarize them at the end of the year. You can take your lead on what can be claimed by looking at Schedule T2125 of your personal income tax return – called Statement of Business or Professional Activities this lists all the various categories like:

    Stationery
    Bank & legal fees
    Postage
    Meals Entertainment
    Communications – includes phone and internet
    Interest – are you paying interest on the system you purchased – it’s applicable as a business expense but it’s not usually taxed so doesn’t come into the HST discussion.
    Rent / Mortgage on the home: claim the interest only on a mortgage otherwise the business owns part of your house and that gets into capital gains territory – ouch!
    Property taxes
    Maintenance and Repairs.
    …and so on. Get the book I recommended.

    Just don’t get greedy – particularly with Meals and Entertainment. It’s seldom you need to discuss your solar system details over a lavish lunch at the club :)

    The hard costs goes against your business income, the HST goes against the HST paid to you. I use TurboTax Premier version because it takes care of the Carry forwards like unused travel expenses. Buy one for $40 and right off the purchase price & HST as a business expense.

    Your tax preparation professional or accountant can help you set this up so the business can run smoothly from the start. This business should run for the length of the 20 year contract, so done right with a bit of work during tax season can rescue a lot of taxes back from the tax man.

    Good Luck.

  • mik:

    We will have our panels installed shortly….can I claim my HST now?…if so,
    what forms do I need?

  • Pamela:

    Hi John…. My name is Pam…..my question, if you haven’t answered it yet…. is

    I’m filing for the first time a T2125 for income taxes…. using HnR block home tax return stuff….. What Class code do you use for depreciation…. where I looked it was 43.2 – 50%… is this the code you used in your first year.

    Second…. our Solar Panels were put on the grid in November of 2011, therefore, final payment for those panels in November, 2011, but I didn’t see a dime until January 2012. Do I have to send in an adjustment to my 2011……

    also, I read that …. your personal tax return .. should not be either a profit or loss until it is depreciated to 0… Is this what your understanding is…. Cuz I am totally confused about the income tax stuff….. driving me crazy and the guys at the government were no help to me either…. they just were asking questions about was it a good investment, how much was my loan… etc…. I hung up on them… any help would be greatly appreiated….

  • Bill:

    Pam. 50% is correct but i don’t believe you claim a loss as a result of depreciation so you’ll have to override the HnR block program to limit your depreciation claim for 2011 since you had no business income ( and 2012 since 50% will exceed your actual income. Might pay to consult a tax accountant for the first year if you’re still messed up by the lingo

  • mik:

    Still awaiting direction for what forms to fill out for HST…….any idears???

  • aaron:

    If i installed december of 2013, then didn’t see any income until January 2014, do i need to file a tax return for 2013? or wait until next year?

    Thanks!

  • Pamela:

    I filed my income the year I received it….I was put on the grid in October… didn’t get a cheque until January of the next year..so that is when I started my filing

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