Paring down: When and How to Deregister from the HST

Barbara Britto

Businesses with revenue over the small supplier threshold ($30,000 in worldwide revenues over four consecutive calendar quarters) must register for, collect, and remit GST or, in participating provinces, HST. However, there are circumstances where a business may choose—or be required—to deregister. This article explains when and how deregistration happens, the consequences, and the steps involved.

When to deregister from the HST

A business may voluntarily or mandatorily deregister for several reasons:

1. Business closure: If a business permanently stops operating, it must cancel its GST/HST registration. This includes bankruptcy, receivership, or the death of a sole proprietor.
2. Small supplier status: If taxable revenues fall below $30,000 over the last four calendar quarters, the business may no longer be required to remain registered and can voluntarily deregister.
3. Change in business structure: A sole proprietorship that incorporates or enters into a partnership may need to cancel the existing GST/HST number and register under the new legal structure. Other examples include mergers or amalgamations.
4. Non-resident ceases carrying on business in Canada: Non-residents with no fixed place of business or no longer carrying on business in Canada may be required to deregister.
5. Change in eligibility: If a business is no longer making taxable supplies in Canada or if its activities become exempt from GST/HST, deregistration may be appropriate.

Consequences of deregistration

Deregistering has both tax and administrative implications:

• Once deregistered, a business can no longer collect GST/HST from customers.
• Before deregistration is approved, the business must remit all outstanding GST/HST collected or owed to the Canada Revenue Agency (CRA).
• Deemed disposition of assets: A business may be considered to have sold its assets at fair market value upon deregistration and may need to account for GST/HST on those deemed sales.
• Loss of input tax credits (ITCs): Once deregistered, a business can no longer claim ITCs for GST/HST paid on business expenses. GST/HST paid can still be treated as a deductible business expense for income tax purposes.

How to deregister from the HST

The CRA allows businesses to cancel their registration through several channels:

1. Ensure eligibility: Confirm that the business meets one of the valid reasons for deregistration. For small suppliers, verify that revenues are below the threshold.
2. Submit a request to the CRA:
   • Online: Log in to CRA My Business Account or have an authorized representative use Represent a Client. Use the “Request to close accounts” option.
   • Mail or fax: Complete Form RC145 – Request to Close Business Number (BN) Accounts and send it to the nearest tax services office.

The BN, effective date of cancellation, and reason for deregistration must be provided.

3. File the final GST/HST return: After the request is submitted, the CRA will determine the final reporting period. The return must include:
   • All GST/HST collected up to the cancellation date.
   • ITCs for eligible purchases made before cancellation.
   • Any adjustments, including deemed dispositions of capital property or inventory.

All outstanding amounts must be paid. Failure to do so may result in penalties or interest.

Bottom line

Deregistering from the GST/HST is a significant administrative step that requires careful planning and compliance. Whether closing, downsizing, or restructuring, businesses must ensure that all GST/HST obligations are met. Keep detailed records and consult a tax specialist to ensure a smooth, compliant process.