The T5018 Survival Guide: Who Needs It, When It’s Due, and How to Avoid Penalties
A quick guide to the T5018 form for trade business owners, covering who needs to file and how to avoid costly CRA penalties.
If you run a business in the trades, whether you are in HVAC, plumbing, roofing, or general contracting, there is a specific tax form that likely causes more confusion than any other. It isn’t your corporate T2, and it isn’t your GST return. It is the T5018: Statement of Contract Payments.
The CRA uses this form to track the "underground economy." Essentially, if you hire other businesses or individuals to help you complete a project, the CRA wants to know exactly who you paid and how much.
If you are staring at a stack of invoices from the past year and wondering if you need to file this form, this guide is for you.
Does this apply to my business?
Many business owners assume that "Construction" only refers to building new skyscrapers or housing developments. However, the CRA has a much broader definition.
For tax purposes, "Construction activities" include:
Installation (e.g., putting in a new furnace or AC unit)
Repair and Maintenance (e.g., fixing a burst pipe or patching a roof)
Excavation and Demolition
Renovation (e.g., remodeling a bathroom)
If your business generates revenue by doing any of the above, you likely fall under the reporting requirements.
The "50% Income" Rule
Just because you own a hammer doesn't mean you have to file a T5018. The CRA applies a simple test: Do construction activities make up more than 50% of your business income?
Scenario A: You run a hardware store that occasionally installs a door for a customer. Since 90% of your income comes from retail sales and only 10% from installation, you likely do not need to file.
Scenario B: You run a plumbing company. You sell toilets and sinks, but you also install them. Even if you make a profit on the parts, the CRA usually views the entire job as a "construction activity." If the bulk of your revenue is tied to site work, you need to file.
Who counts as a subcontractor?
A "subcontractor" is any individual, partnership, or corporation you hire to perform construction services for your business.
Example: You are a General Contractor renovating a basement. You hire an electrician to wire the room and a drywaller to put up the walls. Both of them are subcontractors.
Example: You are an HVAC technician with too many service calls. You pay a friend (who has their own truck) to handle three calls for you. That friend is a subcontractor.
Note: You do not need to file a T5018 for suppliers who only sold you materials (like lumber or piping). You only file for those who provided services (labor) or a mix of labor and materials.
What information do I need to collect?
To fill out a T5018 slip, you need three key pieces of information for every subcontractor you paid $500 or more (including GST/HST) during the reporting period:
Their Name (or Business Name)
Their Address
Their Identifier (Social Insurance Number or Business Number)
The Trap: If you hired a helper for a few weeks in July, paid them by cheque, and never spoke to them again, tracking down their SIN in February can be awkward and difficult.
The Fix: Make it a policy to collect this information before you pay their first invoice. Have every new subcontractor fill out a simple onboarding form. If they refuse to provide a BN or SIN, you are putting your own business at risk of penalties.
When is the T5018 due?
Unlike your personal taxes, which always run January to December, the T5018 offers flexibility. You can choose to report payments based on:
The Calendar Year (January 1 – December 31)
Your Fiscal Year (The same year-end as your corporation)
The Deadline: You must file the T5018 information return within six months after the end of your chosen reporting period.
Most trade businesses choose the Calendar Year because it aligns with T4s (for employees). If you choose the calendar year, your deadline is June 30th.
The penalty for ignoring it
The CRA takes the T5018 very seriously. If you fail to file, or if you file late, penalties are calculated based on the number of slips you should have filed.
Up to 50 slips: $10 per day late (up to $1,000)
51 to 500 slips: $15 per day late (up to $2,500)
Beyond the late fees, failing to file is often a "red flag" that can trigger a deeper audit. If the CRA sees you aren't tracking your subcontractors correctly, they may start wondering what else is missing from your books.
How to make this easier next year
The days of tracking subcontractors in a spiraled notebook are over. The most efficient way to handle T5018s is to use cloud accounting software (like Xero or QuickBooks Online) that allows you to tag vendors as "T5018 Eligible."
When you tag a vendor, the software automatically tracks every payment you make to them throughout the year. When tax season arrives, you can generate a report with one click that lists every sub, their total payments, and their details.
Or, let us take the paperwork off your hands. If the thought of chasing down Business Numbers and formatting XML files for the CRA sounds like a headache, let us handle it.
At Numinor Accounting, we specialize in helping skilled trades businesses stay compliant and audit-proof. We’ll get your books in order, categorize your subcontractors, and handle your T5018 filing so you can get back to the job site.
Let us take bookkeeping off your hands. Forever.
See how Numinor can help your finances with a personalized demo. Get your first month of books free when you sign up.
