What form do I use to claim my portion of car expenses for a business with a partner.

[kehlawler]

There doesn't appear to be a form, other then the T777, that allows me to enter car expenses that I can then add to Part 7 - Other amounts deductable from your portion on the T2125 form.  I am in a business with a partner each with 50% share.  Do I just use the T777 even though I am not employed but self-employed?

[Delphision · Accepted solution]

It has to be on T2125 for self-employment.  There are a couple of things to consider:

1.  The amount can be added on line 9270 as other expense and specify vehicle expense.  It will split 50/50 the same as all other expense.

2. Should it be split 50/50.  Does one partner drive more than the other partner?  Is the vehicle listed under the capital asset portion of the form?

3. If the vehicle expenses do not show on the 2125, add an amount to the capital asset section to bring up the vehicle expenses, fill it in and then delete the asset information.  The correct percentage of vehicle expense, based on the number of kilometers you drove are automatically booked into line 9281.

4.  Both partners should be able to show the number of kilometers driven, in a log book with dates and times and purpose, or CRA may disallow the claim.

[kehlawler]

Each partner has their own car which is owned personally, not by the business.  Previously my accountant used a 'Motor Vehicles Expenses (Business)' form to calculate our individual expenses and then added the result in Part 7 of the T2125 form (Other amounts deductible from YOUR SHARE of the net partnership income).  I am not using an accountant this year and there doesn't seem to be an equivalent form to use for these calculations other then the T777

[Delphision]

All accountants have their own particular spreadsheets to arrive at the amount that is support for any amount that is entered into the T1.  The software does not provide this type of facility.  The best way to arrive at the answer you are looking for is to make your own excel or Open Office spreadsheet.  Use all of the same information that you would normally input into Chart A on the 2125.  You will need to add up all of the vehicle expenses to get a total, take the correct percentage of those expenses based on the number of business km divided by the total km driven in the year, and add that number in Part 7.

[kehlawler]

OK that part is fine then as I can easily do that.  However, how do I then fill out the GST/HST rebate application.  All the fields hook back to the T777 form which I can't use.  Do I have to use overrides to fill in the numbers?

[Delphision]

The reason that the employee form has the GST rebate is because often the company they work for is registered for GST.  In that case, their employment expenses allow them to claim the GST.  In the case of self-employment, if you are not registered for GST, you cannot claim GST input tax credits. You also don't charge GST on your sales and remit it.

[kehlawler]

We are registered for GST.  Previously my accountant used the values from our personal vehicle expenses,  CCA on motor vehicles and accounting fees - but these values would have come from her special form as mentioned above.  The amount isn't significant so if a big deal I will just forget it.

[Delphision]

You should be filing your GST34, annual remittance report, (unless you have quarterly reporting) on which you will report all GST collected, and claim all GST paid, and either remit the difference or claim a refund.  Once registered, you cannot "forget it"  Once registered, if you have sales, you must collect GST by law.  If you fail to do so, CRA will insist that you pay what you should have collected. If you do no business at all, you can still claim the GST on any expenses.  If you do neither, you must file a nil return or CRA will assign arbitrary assessments and suggest that you should pay that.

If your accountant claimed the GST on your vehicle, you will be liable to re-pay the portion of GST that is equal to the GST on fair market value, if or when you close the business.  The vehicle will be a deemed sale back to you due to change of use rules.  GST/HST is a tricky business.

[kehlawler]

hmm ok - we are filing GST remittance forms regularly.   On the GST370 she only claimed the business use portion on the vehicle (both expenses and CCA).  Are you telling me that this may be a problem in the future?  What about the accountant fees claimed on the GST370?  Is there any other way, except by overrides, to fill out the GST370 for these values - assuming of course it's allowed.

[Delphision]

Okay, backtrack.  If the partnership is registered for GST, then the separate partners can claim GST back on the GST 370 for vehicle expenses, and any expenses that you paid personally for the partnership, unless the partnership reimbursed you.  In that case, the partnership claims the GST.  The accounting fees would normally be paid by the partnership, unless the accountant chose to bill each partner separately for doing your income tax. It is the fact of the partnership that allows for a separate claim for GST.  
The CCA is interesting.  So I'm thinking that the accountant is basically charging the CCA cost to the partnership as a service, which would make the CCA taxable.  Otherwise it would not be.  It's legal cost recovery if a bit aggressive. You will need to add the CCA to your spreadsheet, as well.