Personal Services Business

What's the Scoop? commentary
MP's study PSBs - IT professional contracts
KPMG article 2013
Blunt Bean Counter Blog Jan 24, 2012
CGA Canada Magazine article 2007
Ottawa Business Journal - Nov 18 2010
Guides: Active Business Income
Incorporated and self-employed? not likely...

Owner/Manager of your own corporation? Unclear about payroll status? Review the Business section of the CRA Home page and the payroll rules.

If you own the corporation, it is not likely that you are self-employed, it's very likely you will be considered an employee of your corporation. T4012 T2 Corporation - Income Tax Guide provides guidance in Chapter 4.

Corporation Guide T4012

Chapter 4: Only Active Business Income qualifies for a Small Business Deduction 

Introduction to  ABI and SIB (Specified investment business)

What's important? The description of what is NOT considered to be Active Business Income 


Interpretation Bulletins
The Small Business Deduction

See position in paragraph 15

IT432 Benefits Conferred on Shareholders
IT421 Benefits to individuals, corporations...

See mention of "personal services business" under benefits to employees

T2SCH7 Calculation of AII and ABI
Income Tax Act
S. 18(1)(p) limitation personal services expenses
ITA S.125(7) Definition
Draft Legislation October 31 2011
See Clause 26, 27 re limitation on SBD
Other compliance
Association of Workers' Compensation Boards

Review provincial/territorial Workers Compensation regulations for personal services business's. A corporation may not qualify to self-insure if their only client is one large client.  They may be refunded premiums and the client required to pay the premiums as if they were an employee even though they are incorporated.

Court cases
489599 B.C. Ltd. v The Queen, 2008 TCC 332

Departure from Federal Court Hughes & Co.

489599 BC Ltd. has been accepted by CRA and "more than 5 full-time employees" can mean 5 plus a part-time employee.

CRA now accepts VIEWS doc 2008-0300581C6, Income Tax Technical News ITTN-41 and 2008 Cdn Tax Foundation conference report at 3:5-6 (superseding IT-73R6 para. 15).

In 1994, Justice Muldoon in Hughes case argued that at least six full-time employees were required and that part time employees were not contemplated.

In 2008, Justice Campbell disagreed and said that five full-time employees and at least one part-timer would qualify, making the company eligible for the small business tax rate and deductability of non-employee in nature business expenses. 


The Queen v Hughes & Co. Holdings Ltd. 94 DTC 6511

Not available on Canlii (starts posting in 1996)

Lerric Investments Corp v Canada 2001 FCA 14
Lerric Investments Corp v The Queen 1999 Canlii396
Employee or self-employed?
RC4110 Employee or Self-Employed
CPP EI explained




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