Construction Holdback Release and HST Timing Calculator
The holdback is not overdue, it is not yet due. Work out the exact lien expiry date, the release date, when HST becomes payable on the holdback, and which fiscal year the income lands in.
holdback receivable
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The Timeline, Date by Date
| Event | Basis | Date |
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The Money
| Item | Basis | Amount |
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Tax and HST Timing
| Item | When | Amount |
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The Cash Timing Gap
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Points That Decide This
What to Do Next
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Disclaimer: The Ontario Construction Act requires an owner to retain a holdback of 10% of the value of the services or materials supplied under the contract. For contracts and improvements to which the current Act applies, a lien arising in respect of an improvement expires 60 days after the earlier of the date the certificate or declaration of substantial performance is published and the date the contract is completed, abandoned or terminated. The holdback is required to be paid where all liens have expired or been satisfied, discharged or otherwise provided for, and the Act contemplates payment no later than 14 days after the expiry of the lien period where no lien is preserved. A subcontractor’s lien period runs from publication of substantial performance of the contract, or from the date the subcontract is certified complete where that route is used, and the dates modelled here follow publication. Transition rules apply to contracts entered into before the amendments came into force, and the previous 45-day period may apply to older contracts. Under paragraph 12(1)(b) of the Income Tax Act an amount is not included in income until the day on which it is receivable, and a holdback retained under the Act is generally not receivable while it is being held, so the income inclusion follows the release rather than the progress billing. HST on the holdback portion follows the same timing, becoming payable when the holdback becomes due rather than when the progress invoice is issued. Corporate tax is applied at the Ontario combined rate of 12.2% on active business income within the $500,000 small business limit. Lien and holdback questions are legal questions and the dates produced here are indicative for planning: the operative dates should be confirmed with construction counsel on the specific contract. This page is general information, not tax or legal advice.
Publication Starts the Clock, Not the Invoice
Contractors chase holdback as though it were an overdue receivable. It is not overdue, it is not yet due, and the date it becomes due is set by the Construction Act rather than by your payment terms.
The sequence runs from publication of the certificate or declaration of substantial performance. Sixty days later the lien period expires. Where no lien has been preserved, the holdback becomes payable and the Act contemplates payment within fourteen days of that expiry.
| Event | Timing |
|---|---|
| Publication of substantial performance | Day zero |
| Lien period expires | 60 days later |
| Holdback payable | Within 14 days after that |
Chasing holdback before the lien period has expired achieves nothing except annoying the payer. They cannot release it safely and they know it. The productive call is the one made on day sixty-one, and it is far more effective because you can point at the date.
Publication Is a Step Somebody Has to Take
The clock does not start because the job finished. It starts on publication, and publication is an act. If nobody publishes the certificate, the sixty days never begins and the holdback sits there indefinitely.
That is the single most common reason holdback ages on a balance sheet for a year or more. Everyone assumes the clock is running and nobody checks that publication happened. It is worth confirming in writing rather than assuming.
Ask the payer for proof of publication and the date, in writing, and file it with the contract. That one document sets every date on this page, drives your tax position, and is the thing you will want when the release conversation gets difficult.
The Income Follows the Release, Not the Billing
An amount goes into income when it becomes receivable. A holdback retained under the Act is not receivable while it is being held, so the income inclusion follows the release date rather than the progress invoice.
That is where the fiscal year matters. A holdback that becomes payable in November on a December year end is taxable this year. One that becomes payable in January is taxable next year, and the tax on it is deferred a full twelve months.
| Publication | Release Roughly | December Year End |
|---|---|---|
| 15 September | Late November | This year |
| 15 November | Late January | Next year |
| 1 December | Early February | Next year |
On a project finishing in the autumn, the publication date effectively chooses your tax year. That is not a reason to delay a project, and it is a reason to know where the line falls before agreeing the certification date with the owner.
HST Follows the Same Timing
The HST on the holdback portion is not payable until the holdback becomes due. Contractors routinely remit on the full progress invoice including holdback, which funds tax on money they have not received and will not receive for months.
On a two point eight million dollar contract with a ten percent holdback, that is thirty-six thousand four hundred dollars of HST remitted early against nothing collected. It comes back eventually. In the meantime it is working capital gone from a business that runs short of exactly that.
You Are on Both Sides of This
A general contractor holds back from subcontractors while the owner holds back from them. Those two flows have their own dates and they do not necessarily line up.
- Your receivable from the owner, released after the lien period on the contract
- Your payable to subcontractors, which you release once your own position is safe
- The net position, which is what actually matters to cash
- The obligation to release, which is yours once the liens have expired
- The risk of releasing early, which is that you pay twice if a lien is preserved
The net figure is usually far smaller than the gross holdback receivable, which is why a balance sheet showing four hundred thousand of holdback receivable can represent a much smaller genuine cash gap.
Track It in Its Own Account
None of the tax treatment survives an audit unless the books can show which receivable is holdback and when each piece was certified. That means a separate holdback receivable account, not a note in the trade receivables ledger.
- A holdback receivable account separate from trade receivables
- A holdback payable account for what you retain from subcontractors
- The publication date recorded against each project
- The computed release date alongside it
- Proof of publication filed with the contract
- The HST split so the holdback portion is not remitted early
Without that structure the exclusion from income cannot be supported and the whole amount goes back into taxable income. The tax treatment is not a policy choice made at year end, it is a bookkeeping capability built during the year.
Older Contracts May Run on Different Timing
The Construction Act amendments changed the lien period, and transition rules apply based on when the contract was entered into or the procurement process began. A contract predating the change may run on the older forty-five day period.
On a long-running project that distinction is live, and it is a legal question about your specific contract rather than something a calculator settles. Where the answer matters to a year end position, it is worth asking construction counsel rather than assuming.
What This Calculator Does Not Cover
- Whether a lien has been preserved, which stops the release entirely
- Transition rules for contracts predating the Act amendments
- Annual holdback release on long-duration contracts where the contract permits it
- Finishing holdback for work completed after substantial performance
- Trust obligations on funds received
- Prompt payment and adjudication timelines, which run separately
Get the publication date in writing and everything else follows from it. Our construction accounting service covers the holdback tracking, the HST split and the year end position.
Frequently Asked Questions
Common questions on holdback release and timing.
Related Calculators and Guides
More tools for contractors.
Get the Publication Date, Then the Rest Follows
Send us the contract, the certification documents and your trial balance. We will set up the holdback accounts, compute every release date, split the HST correctly and tell you which fiscal year each project lands in.