Many Ontario and B.C. business owners are apprehensive about the way they’ll be impacted by the introduction of the HST, and advisors can help them prepare.

In a recent Bank of Montreal (TSX:BMO) survey of 427 businesses conducted by Harris/Decima, 51% of Ontario business owners said they expect the impact of the HST will be negative, while 33% believe it will have a positive effect.

Businesses in B.C. are more divided, with 41% anticipating a negative impact, and an equal proportion anticipating a positive impact.

BMO economists expect the HST to lead to substantial savings for businesses, and to encourage investment, helping to boost productivity and the province’s competitiveness.

“Businesses in Ontario will benefit by the implementation of HST as it will lower costs and should encourage investment in the province,” said Mark Shoniker, director of commercial banking, BMO Bank of Montreal. “But businesses will also have to make some adjustments so they are ready for the changes that will come with the HST.”

When working with small business owners, here are some tips for helping them prepare:

Help them revise their budgets

Some items that business owners would normally purchase and recover under the provincial sales tax may not be recoverable with the HST, which could affect their budget. Conversely, most businesses that now sell GST-taxable goods and services, including exports, will be able to claim input tax credits for any HST paid on assets and expenses.

Adjust cash flow forecasts

Purchases that are currently exempt from PST, such as telephone equipment and computers or office supplies, will now face HST, which can be claimed as an ITC. The cash flow for your client’s business may be affected because of the time interval between paying for the HST and getting the ITC refund. Encourage business owners to take this lag into consideration and revise the projections for their cash flow.

Modify invoices

All invoices should be changed to include the new tax rate on applicable goods and services. They should state the proper rate, your client’s GST/HST registration number and any other information that should be indicated according to Canadian Revenue Agency regulations.

Review eligibility for credit

Businesses that make less than $2 million in annual revenue from taxable sales are eligible for a $1,000 credit from the Ontario government. If your client’s business falls into this revenue category, encourage them to fill out a form to receive the credit.

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