Accounting & Tax Services for Consultants & Independent Professionals in Canada

Independent consulting in Canada — watch for Personal Services Business

Independent consulting is one of the fastest-growing employment categories in Canada. IT consultants, management consultants, marketing consultants, engineering consultants, project management contractors, and many other forms of independent professional services have moved well beyond traditional employment models. The tax planning opportunity is substantial: incorporation, the small business deduction, expense deductibility, and (within TOSI limits) some family income planning.

The tax risk is also substantial. The Personal Services Business (PSB) rules under the Income Tax Act treat an incorporated consultant as a "personal services business" if CRA determines that, absent the corporation, the consultant would reasonably be considered an employee of one client. PSB status strips most operating deductions and applies a federal corporate tax rate of 38% (rather than the 9% small business rate or 15% general rate). The combined corporate-personal tax burden on PSB income is among the highest in Canadian tax — often exceeding what the individual would have paid as a direct employee. Avoiding PSB status is critical.

Who we serve

• Independent IT consultants (developers, architects, project managers, network engineers, cybersecurity)
• Management consultants (strategy, operations, transformation, change management)
• Engineering consultants
• Marketing and creative consultants
• Financial consultants and fractional CFOs
• HR and recruitment consultants
• Healthcare consultants
• Public-sector consultants (federal, provincial, municipal procurement)

Avoiding Personal Services Business status

The PSB analysis is fact-based. CRA examines the actual working relationship using the same four-factor common-law test used for employee vs contractor: control, ownership of tools, chance of profit/risk of loss, and integration. The structural choices that reduce PSB risk include:

• Working for multiple clients during the year (the single most powerful protective factor)
• Genuine ability to subcontract or substitute
• Bearing real risk (e.g., fixed-fee or milestone-based engagements rather than pure hourly)
• Providing your own tools and equipment
• Working from your own premises where practical
• Setting your own hours and methods
• Having a clear written services agreement that reflects an independent relationship
• Marketing the business genuinely (website, business cards, networking)
• Having business insurance (errors and omissions, general liability)

We review consulting engagements for PSB risk and advise on structure before incorporation.

The incorporation decision for consultants

Once PSB risk is managed, incorporation generally makes financial sense for consultants earning $100,000+ of net business income annually who can retain meaningful earnings inside the corporation. The combined federal-provincial small business rate of 9%–12.2% (depending on province) on the first $500,000 of active business income creates substantial tax deferral compared to the 47%–53% top personal marginal rate. We model the decision with actual numbers from the consulting practice.

What we deliver for consultants

• T2125 self-employment income for non-incorporated consultants
• T2 corporate income tax return for incorporated consultants
• GST/HST registration and quarterly or annual returns
• Quick Method election analysis (especially valuable for service-based consultants)
• PSB risk review and structural recommendations
• Salary vs dividend optimization annually
• Home-office and vehicle expense optimization
• CCA on computers, equipment, and professional library
• Foreign-client tax treatment (zero-rated GST/HST for services to non-residents in most cases)
• RRSP and IPP planning for retirement
• Year-end Compilation Engagement financial statements where required

What Canadian businesses commonly miss about this service

Across the hundreds of Canadian businesses we work with, the same handful of issues come up repeatedly. Many small business owners delay engaging professional accounting until a crisis: a CRA review letter, an unfiled GST/HST return demand, a denied bank loan because financial statements aren't ready, or a Notice of Reassessment that arrived weeks ago. By the time we are first contacted, the cost to fix the problem is often several times what proper ongoing accounting would have cost from the start. Proactive engagement is dramatically cheaper than reactive cleanup.

The Canadian tax landscape also changes constantly. Recent changes that affect most Canadian taxpayers include the 2023 anti-flipping rule (residential real estate sold within 365 days is automatically business income, not capital gain); the Underused Housing Tax (UHT-2900 annual filing requirement for many corporations, partnerships, and trusts holding residential property even when no tax is owing — with $5,000 to $10,000 per-property failure-to-file penalties); the Quebec QST joint registration changes since 2021; the post-2018 Tax on Split Income (TOSI) rules that effectively eliminated casual income splitting through family dividends; the post-2021 $200,000 stock option vesting limit on the 50% deduction for options granted by non-CCPCs; the CSRS 4200 Compilation Engagement standard replacing the older Notice to Reader engagement; and ongoing CRA increased scrutiny on pre-construction assignments, short-term rental businesses, and cash businesses.

How BOMCAS Canada delivers this service

Every engagement begins with a written, fixed-fee engagement letter signed before any work is performed. The engagement letter describes exactly what is in scope, what deliverables you will receive, when those deliverables are due, what your monthly or project fee is, and what (if anything) is outside scope. This eliminates the hourly-billing surprise that most accounting clients fear. The only time we use hourly billing is for genuinely unpredictable items such as CRA audit response or complex one-off projects — and even then we agree to a maximum cap before starting.

Once the engagement letter is signed, you e-sign the CRA authorization (RC59 for businesses or AUT-01 for individuals), and we onboard you to the encrypted client portal with multi-factor authentication. All document exchange flows through the portal — no emailing of sensitive financial documents. Meetings happen by video conference or phone at times that work for you, including outside normal business hours when needed.

Our Canadian tax compliance philosophy

BOMCAS Canada is structured around four operating principles:

1. Tell the truth. If a tax position is aggressive, we say so. If a deduction will not survive a CRA review, we say so. If the engagement is going to cost more than originally quoted because the scope changed, we say so before doing the work.
2. Bill what we said we would bill. No surprise invoices. No scope-creep billing. If something legitimately changes scope, we discuss it and re-quote before doing the additional work.
3. Answer the phone. One-business-day response standard on client communications during normal business hours. No voicemail backlogs.
4. Specialize. Canadian tax and accounting is too complex to be a generalist. We do not do US-only tax, UK tax, or any other foreign jurisdiction in isolation. We are Canadian. Our cross-border work is always anchored by deep Canadian compliance.

What ongoing engagement with BOMCAS Canada looks like

For most clients, the ongoing relationship is structured around predictable monthly deliverables. For an incorporated small business client, that typically includes: monthly cloud bookkeeping with full bank and credit card reconciliation; quarterly or annual GST/HST returns prepared and filed; monthly payroll for owner-managers and any employees, with CRA source deduction remittances; year-end Compilation Engagement (CSRS 4200) financial statements; T2 corporate income tax return; owner-manager T1 personal tax return (and spouse where applicable); annual salary-vs-dividend optimization with written recommendation; unlimited email and phone support during business hours; one quarterly check-in call to review numbers and discuss the business; and CRA correspondence handling for routine review letters.

For a personal tax client, the ongoing engagement includes: annual T1 preparation; any required Quebec TP-1 (for Quebec residents); CRA pre-assessment and post-assessment review response when CRA requests additional documentation; Notice of Assessment reconciliation; and proactive tax planning conversations during the year about RRSP, TFSA, and FHSA contributions, major life events (marriage, kids, retirement, real estate), and any planned business or investment changes.

Frequently asked questions about engaging BOMCAS Canada

Why Canadian businesses choose specialized accounting over generalist accounting

The Canadian tax and accounting landscape has become significantly more complex over the past decade. The 2018 TOSI rules, the 2021 changes to stock option taxation, the 2022 mandatory reporting changes for trusts, the 2023 anti-flipping rule, the Underused Housing Tax, the changes to the small business deduction phase-out for passive investment income, the new CSRS 4200 Compilation Engagement standard, the continued expansion of digital sales tax rules, and the ongoing post-COVID CRA focus on cash businesses and unreported income have all required accountants to specialize more deeply. A generalist firm trying to cover personal tax, corporate tax, US tax, real estate, trusts, cross-border, and every industry vertical inevitably falls behind on the depth of expertise that any one client needs.

BOMCAS Canada is structured deliberately to maintain depth: we are Canadian-only by design; we work in industries where we have genuine specialized experience; we maintain ongoing professional education in Canadian tax law; we use Canadian-experienced staff at every level; and we coordinate with specialized partners (US-licensed cross-border, legal counsel for corporate restructuring, audit-engagement licensed practitioners) where required rather than trying to handle everything in-house.

Talk to a Canadian accountant who knows your industry

Call 780-667-5250 or submit the contact form. We respond within one business day.

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