As proposed in the March 22, 2017 budget, every professional
must include year-end work-in-progress (WIP) into taxable income
effective for taxation years beginning after March 21, 2017. WIP
for professionals typically represents unbilled professional time
and cost incurred in the rendering of services to clients. This is
often captured in the form of a professional's
"charge-out" rate, which represents their cost, overhead
and some profit component.
What are the pre-budget rules and impact?
Provisions in the Income Tax Act previously allowed certain
professionals (accountants, dentists, lawyers, medical doctors,
veterinarians and chiropractors) who complete work over months or
in some cases years to defer taxation on the associated income
until the work was completed and invoiced. This allowed
professionals to better match the recognition and payment of tax
with the cash receipts for a particular taxation year.
