Contractors and trades
Accounting for Contractors and Trades in Ontario
Last reviewed: August 2026
Construction accounting is different because the money and the work happen at different times. You bill progressively, hold back 10%, buy materials before you get paid for them, and file a slip type that exists in no other industry.
We handle corporate tax, bookkeeping, HST and payroll for electrical, plumbing, HVAC, renovation, cleaning and general contracting corporations across the GTA.
What makes contractor books different
| Issue | Why it catches people |
|---|---|
| T5018 slips | Construction businesses paying subcontractors must report them. No other industry has an equivalent slip, so it is an easy one to miss. |
| Holdbacks | Statutory holdback is not revenue when billed and HST on it is not payable when billed. Getting this wrong pulls tax forward by months. |
| Progress billings | Each billing is taxed on the earlier of payment and the day it becomes due, not on completion of the job. |
| Substantial completion | HST becomes payable whether or not you have invoiced. You cannot defer tax by invoicing late. |
| Deposits | A deposit sits outside the HST net until you apply it to an invoice. A relabelled progress payment does not. |
| Work in progress | Unbilled labour and materials are an asset. Ignoring them makes a profitable year look like a bad one. |
| Vehicle classification | A service van is usually Class 10 with no ceiling. A pickup used the wrong way falls into Class 10.1 and gets capped. |
| WSIB | Mandatory coverage in construction, including for many independent operators and executive officers who assume it does not apply to them. |
The trades we work with
Electricians
ECRA/ESA contractor licence and Master Electrician fees, notification of work costs and whether they are recovered in your rate, the apprenticeship credit, and the 309A versus 442A compulsory trade question that most sources get backwards.
Plumbers
Van stock and inventory, emergency call pricing, subcontracted drain and excavation work, and T5018 obligations on the crews you hire in.
HVAC contractors
Annual maintenance agreements paid up front are deferred revenue, not income. Equipment is inventory until it is installed. TSSA certification and contractor registration are two separate recurring costs, and two peak seasons mean two cash flow troughs.
Renovation contractors
The 90% substantial renovation test, whether you are a builder for HST purposes, which is usually not and is good news, and the rebates your clients may be entitled to on work you are doing right now.
Cleaning and facility services
High staff turnover, the contractor versus employee question at scale, supply purchasing, and multi-site scheduling that has to reconcile to one set of books.
General and specialty trades
Framing, drywall, roofing, concrete, landscaping, painting, flooring, masonry and excavation. Same core problems: holdbacks, subcontractors, seasonality and equipment.
What we handle
- Corporate tax (T2), including the year-end close and CRA correspondence
- T5018 information returns for subcontractor payments, filed on time
- GST/HST with the timing rules that actually apply to construction rather than the general ones
- Bookkeeping in QuickBooks Online, set up with job costing so you can see margin by job rather than only for the year
- Payroll, T4 and T5, including apprentice wages and the apprenticeship credit
- WSIB account review and clearance certificate practice
- Personal tax (T1) for the owner and family
- Planning: equipment purchases, incorporation timing, salary versus dividend, and reserving for the HST that comes due in your slow months
Where contractors lose money
In our experience, in roughly this order.
- Holdback receivable never chased. The job finished, the holdback period expired, nobody sent the invoice.
- Change orders done on a handshake. Still the single largest source of unbilled labour in residential trades.
- Materials marked up at cost. Handling, waste, returns and financing are real. Cost-plus-nothing is a loss.
- Permit and notification fees not recovered. A $46 fee on a $300 job is 15% of the invoice.
- Apprentice hours billed as journeyperson hours, or the reverse, charged at a rate that assumes productivity that is not there yet.
- No reserve for HST and corporate tax. Both come due in the trough after the peak, which is precisely when the cash is gone.
- Equipment bought in the wrong month, in the wrong entity, or classified in the wrong CCA class.
Free tool
Is your subcontractor actually a subcontractor?
Thirteen questions covering the factors CRA looks at: control, ownership of tools, chance of profit and risk of loss. You get which way they point and which ones are working against you. It is the most expensive thing on a contractor's file to get wrong.
Frequently asked questions
What is a T5018 and do I have to file one?
A T5018 is the Statement of Contract Payments. If more than 50% of your business income comes from construction activities, you must report subcontractors paid more than $500 in the reporting period, excluding GST/HST. It is due six months after your reporting period end, and the period can be your fiscal year or the calendar year, chosen once and then applied consistently.
Is HST payable on a construction holdback when I bill it?
No. HST on a holdback is payable on the earlier of the day the holdback is actually paid and the day the holdback period expires. That is different from the rest of the invoice, which is taxed on the earlier of payment and the day it becomes due.
Can I defer HST by invoicing late at the end of a job?
No. Where the consideration has not been paid or become due by the last day of the month following the month in which the work is substantially completed, HST becomes payable on that day regardless of what your contract or your invoicing schedule says.
Is my work van a passenger vehicle for tax purposes?
Usually not, which is what you want. A van seating one to three used more than 50% to transport goods and equipment to earn income, or a pickup seating four to nine used 90% for that purpose, is a motor vehicle. It goes in Class 10 at 30% with no cost ceiling, rather than Class 10.1 where the capital cost is capped.
Do I need WSIB coverage if I am the owner and I work alone?
Coverage is mandatory in construction far more often than owners expect, including for many independent operators and executive officers. Assuming you are exempt without checking is a common and expensive mistake, and general contractors will ask you for a clearance certificate before releasing payment.
Is my subcontractor actually a subcontractor?
Not always. CRA applies a two-step approach for contracts formed outside Quebec, looking first at the parties' shared intent and then at the actual working relationship: control, ownership of tools, chance of profit and risk of loss. A written contract that says “independent contractor” does not settle it. Getting it wrong makes you liable for unremitted CPP, EI and income tax, plus penalties and interest.
What is the corporate tax rate for a contractor in Ontario?
From July 1, 2026, an Ontario CCPC pays 9% federal plus 2.2% Ontario, a combined 11.2% on active business income within the small business limit. The Ontario rate was 3.2% before that date, and fiscal years straddling July 1, 2026 are prorated between the two.
Do you work with contractors outside the GTA?
Yes. Most of the work is done remotely with document exchange and video calls. Our client base is concentrated across Mississauga, Oakville, Vaughan, Markham and Toronto, but the rules are provincial and federal, not municipal.
Talk to an accountant who works with contractors
Fixed fees quoted up front. T5018, holdbacks, HST timing and job costing are routine work here, not something we look up after you ask.
Guides
Contractor and trades guides
When HST becomes payable on a construction contract
When HST becomes payable on construction progress billings, how the substantial completion rule works in Ontario, and why invoicing late defers nothing.
Read the guideWhat a contractor's books have to track that other businesses do not
How job costing, labour burden and work in progress should be set up in an Ontario contractor's books, and what a good monthly close produces.
Read the guideT5018 filing for Ontario contractors
Who has to file a T5018, what counts as a reportable payment, when the return is due, and the three errors that cause most contractor penalties.
Read the guideAccounting for electricians in Ontario: licence costs, permits and apprentice ratios
Accounting for electricians in Ontario: what the ESA contractor licence and notification fees cost, how to code them, and the 1:1 apprentice ratio.
Read the guideAccounting for HVAC contractors in Ontario: maintenance plans, equipment and rebates
Accounting for HVAC contractors in Ontario: why maintenance plans are deferred revenue, how equipment margin differs from labour, and rebate HST.
Read the guideAccounting for plumbers in Ontario: what a call-out really earns
Accounting for plumbers in Ontario: why after-hours premiums flatter a job margin report, how to split parts from labour revenue, and what callbacks cost.
Read the guideConstruction holdbacks in Ontario: HST timing, WIP, and the 2026 annual release rules
Ontario's mandatory annual holdback release started January 1, 2026. When HST on a construction holdback is payable, and how holdbacks sit against WIP.
Read the guideWhat an hour actually costs your trades business to sell
How an Ontario contractor builds a true hourly rate: billable versus paid hours, labour burden, overhead recovery, and the arithmetic to a shop rate.
Read the guideHiring your first apprentice: what changes and what it actually costs
Hiring a first apprentice in Ontario: payroll setup, remittances, WSIB, ESA vacation and holiday pay, and the real loaded cost of an apprentice hour.
Read the guideCash flow through a seasonal year in the trades
Seasonal cash flow for Ontario trades: what to hold back from every deposit, when the HST and corporate tax land, and how a rolling 13-week view works.
Read the guideSubcontractor or employee? What decides it, and what a wrong answer costs
Subcontractor or employee for Ontario contractors: how CRA decides, what unremitted CPP and EI cost the payer at 2026 rates, and how to get a ruling.
Read the guideSubstantial renovation and HST, a different set of rules
What makes a renovation substantial for GST/HST, when self-supply applies, the housing rebates, and what an Ontario contractor must show on an invoice.
Read the guideTools and equipment deductions for Ontario trades
How Ontario trades deduct tools and equipment: the Class 12 threshold, CCA classes 8, 10 and 43, the half-year rule and the tradesperson's tools deduction.
Read the guideWork trucks and vans: how Ontario trades escape the $39,000 vehicle cap
The 2026 passenger vehicle cap is $39,000, and the 50% and 90% hauling tests decide whether your work truck or van is capped in Class 10.1 at all.
Read the guideWSIB for Ontario trades: coverage, clearances, and the one-officer exemption
WSIB coverage is mandatory in Ontario construction. The one-officer exemption, clearance certificates, 2026 premium rates by class and reporting rules.
Read the guideThe apprenticeship tax credit for Ontario employers
What the federal apprenticeship tax credit is worth, why Ontario's own apprenticeship credit no longer applies, and how to make the claim stick.
Read the guide