Purchasing, renovating or selling your house when it is used primarily as your place of residence.
If you begin operating a B & B establishment in your home, you will not incur any tax liability on your house while operating the B & B establishment, or when you close your B & B operation, or on any later sale of your house, provided you continue to use your house primarily as your place of residence.
You may not claim an ITC for the GST/HST paid on a house you purchase or renovate when you use the house partly in your B & B operation but primarily as your place of residence. For more information, refer to paragraph 41 in GST/HST Memorandum 19.4.2, Commercial Real Property: Deemed Supplies.
You may be able to claim a GST/HST New Housing Rebate for a portion of the GST/HST paid to a builder for the purchase of a new or substantially renovated house (whether you purchase the land or lease it long-term from the builder), or for a portion of the GST/HST paid on your costs if you build or substantially renovate your house, provided the house is used primarily as your place of residence. Substantial renovation means 90% or more of the interior of the house has been removed or replaced. For additional information on substantial renovations, refer to the GST/HST Technical Information Bulletin B-092, Substantial Renovations and the GST/HST New Housing Rebate. The rebate is not available to individuals that are members of a partnership or to an incorporated entity. For more information on the rebate, refer to the GST/HST Guide RC4028, GST/HST New Housing Rebate.
Finally, since you are using your house primarily as your place of residence, you would not charge the GST/HST when you sell it.
In August 2006, Ms. Green buys a new house from a builder for a price of $300,000 (excluding GST or HST). The house is bought for use primarily as her place of residence and she uses two bedrooms to operate a B & B establishment. Ms. Green is eligible to claim a GST/HST New Housing Rebate for a portion of the GST/HST paid to the builder on the purchase of the new house. Since Ms. Green uses her house primarily as her place of residence, she would not charge the GST/HST when she sells it.
Mr. Brown lives in a four-bedroom house and, in September 2006, adds an addition consisting of two bedrooms and a common sitting room in which he operates a B & B establishment. Since he uses his renovated house primarily as his place of residence, ITCs are not available for the GST/HST that he pays on expenses related to the renovation of the house. Also, Mr. Brown is not able to claim a GST/HST New Housing Rebate for expenses related to the addition because he has not substantially renovated his house. As mentioned earlier, substantial renovation means 90% or more of the interior of the existing house has been removed or replaced. If he is a registrant, Mr. Brown may be eligible to claim ITCs for the GST/HST paid on purchases and expenses used in his taxable B & B operation. Since Mr. Brown uses his house primarily as his place of residence, he would not charge tax on any later sale of his house.