We had an electrician do some electrical upgrades to a unit we are leasing. The landlord agreed to reimburse us for part of the cost.
We received the invoice from the electrician, the payment (SubTotal + HST) was recorded in Payments in the Repairs and Maintenance account. This gives us an input tax credit.
We then created a Sales Invoice (again SubTotal + HST) allocated to the Repairs and Maintenance account and sent it to the landlord.
Now I’m not sure if I did this right.
Conceptually it seems correct that we can claim the input tax credit on the expense, and by invoicing the landlord it reduces our input tax credit and he gets to claim the HST on his portion of the expense for the reimbursement.
When we file our HST return to the CRA they’re looking for sales and HST collected on sales. I don’t think it would be correct to include the invoice to the landlord since we didn’t sell him anything, the transaction was not allocated to a Sales account. But, if I do not include the invoice to the landlord it would result in an incorrect input tax credit that is too high since we would be claiming the landlords portion.
How do I handle this situation correctly?
Thank you in advance!