The government’s recent introduction and enhancement of Corporate Investment Tax Credits have major bookkeeping implications for companies that invest in capital property. These credits are not just about saving tax — they change how you must record what you buy, when you use it, and how you prove eligibility. Understanding this change is essential as it can significantly impact your business bookkeeping.
In this blog, we explain key new investment credits, how they affect your bookkeeping practices, common risks, and how you can adjust your systems to make the most of them.
What Are These New Corporate Investment Tax Credits?
A corporate investment tax credit is a tax incentive that rewards companies for putting money into certain types of capital investments. Corporate Investment Tax Credits are not simple cost deductions. Rather, they are credits — they reduce your actual tax liability.
The “new” credits mean that the government is encouraging specific kinds of investments now more than before. These could include:
Clean-technology manufacturing machinery
Clean electricity equipment (such as low-emission generators or storage systems)
Carbon capture, utilization, and storage infrastructure
Scientific research and experimental development (SR&ED) capital assets
Because these credits are targeted toward “green” and innovation-driven investments, they change not just what companies buy, but how they account for those purchases.
Understanding New Corporate Investment Tax Credits and Their Basics
Here are the main and new Corporate Investment Tax Credits to look out for, and how they differ from typical capital-asset tax incentives:
Clean Technology Manufacturing Credit
This credit applies when a company buys machinery or equipment used in clean-tech manufacturing. It rewards capital spending on things like processors, clean-energy machines, and other tools that reduce environmental impact.
Clean Electricity Credit
Companies that invest in low-emission electricity equipment — for generation, storage, or transmission — can claim a portion of the cost as a credit. This encourages investments in cleaner power systems.
Carbon Capture, Utilization, and Storage (CCUS) Credit
This is one of the most generous credits. Investments in capturing carbon from the air or industrial processes, transporting it, or storing it can qualify. Because decarbonization is a big push, this credit is structured to encourage long-term investments.
Enhanced SR&ED Credit
Scientific research and development often receives tax support. Under the new rules, more companies may qualify for an enhanced refundable credit, and certain types of capital expenditures that were excluded before may now be included.
How These New Corporate Investment Tax Credits Affect Your Bookkeeping
These new Corporate Investment Tax Credits aren’t old credits that you can ignore in your daily ledger work. They can touch multiple parts of your books and affect your decisions all year long. Here is how they might change your bookkeeping:
Detailed Tracking of Capital Costs
Because credits are based on capital cost, you must be precise. It is not enough to lump everything under “equipment.” You need to record:
The exact purchase cost
The date of purchase
The class of the asset (to match your accounting system)
Vendor and invoice details
If you do not track these well, you may under-claim or even disqualify some items.
Recording “In Service” or “Available for Use” Dates
Many ITCs require that the asset be placed into “service” — that means it is usable in your business, not just sitting in a warehouse. You need to capture in your books:
The date when the asset is first used
Any installation or commissioning notes
Evidence of use (if required)
This information is vital to link the purchase with the credit. Without it, tax authorities may question whether the asset was actually used or just bought.
Segregating Credit-Eligible Assets
Not all assets qualify for these new credits. So, bookkeeping must separate:
Eligible clean-tech or green assets
Regular capital assets
Assets qualifying for SR&ED
This segregation helps when preparing credit claims. If all assets are mixed, your reports may become messy and hard to audit.
Tagging in Your Accounting System
To support segregation, you might use tags or special codes in your bookkeeping or accounting software. For example, you could:
Tag purchases as “CTM Credit Eligible” or “CCUS Eligible”
Use classes or sub-classes for asset type
Add custom fields for “credit eligibility” and “in-service date”
These tags help you run reports easily at year end, and avoid missing credits.
Corporate Investment Tax Credits
Documenting Installation and Use
Some credit-eligible investments need proof of installation, or that they are actually used in operations. For bookkeeping:
Keep installation agreements, photos, or notes
Maintain usage logs for how the asset is used in regular business
Record monthly or quarterly usage in a simple note or journal
These records become part of your audit trail if the credit is ever reviewed.
Estimating Credit Receivables
Because some of these credits are refundable, you might treat part of the future credit as a receivable in your books — at least on a provisional basis. That means:
Estimating how much credit you may claim
Recording a memo or receivable entry (if your accounting policy allows)
Reflecting it in cash flow forecasts, but not treating it as guaranteed until confirmed
This helps you plan your cash flow without over-committing based on uncertain credit.
Adjusting Past Capital Entries
If you made capital purchases earlier in the year, before realizing the new credit rules applied, you may need to go back and:
Reclassify the asset under the correct capital class
Add or correct the “in-service” date
Tag the asset as credit-eligible
Insert relevant documentation into your files
These retroactive adjustments can strengthen your credit claim.
Strengthening Your Audit Trail
Because tax authorities may audit these credit claims, maintaining a strong audit trail is more important than ever. Your bookkeeping should support:
Clear invoices and receipts
Contract or purchase orders
Installation or commissioning proofs
Usage logs and operating reports
If your books are weak, you risk having your credit claim challenged, reduced, or denied.
Risks and Challenges in Bookkeeping for These Credits
While the potential benefit is big, there are several bookkeeping risks:
Over-optimistic credit estimates: If you overestimate, you might plan your budget or cash flow poorly.
Classification error: Misclassifying assets can disqualify them for credit.
Weak documentation: Poor records for installation or usage can lead to trouble.
Software limitations: Legacy systems may not support detailed tagging or fields.
Timing risk: If the in-service date is not recorded properly, you may miss eligibility.
Segregation failure: Mixing credit and non-credit assets can make your claims messy and risky.
These risks mean that you cannot treat these credits as something you’ll sort out only at the end of the year. They demand your attention at the time of investment.
How to Update Your Bookkeeping for This Credit Regime
Here are some practical steps you can take to align your bookkeeping with the new credit landscape:
Set up new account codes
Create specific ledger accounts (or subaccounts) for credit-eligible capital property in your accounting software.
Use tags or custom fields
In the purchase entry screen, add a tag or field to mark items that may qualify for a credit.
Record the “in service” date
Make it standard practice to note the date an asset is first used or installed.
Store supporting documents in an organized folder
Maintain a digital folder (cloud or local) for all purchase invoices, installation proofs, and usage logs.
Track usage regularly
If required, note usage of the asset monthly or quarterly in a simple log or journal entry.
Estimate your credit
Work with your finance or accounting team to make a reasonable estimate of the credit you will claim, and reflect that in your financial planning.
Review older capital purchases
Look back at assets bought this year (or even last year) that might now qualify. Reclassify, tag, and document them properly.
Train your bookkeeping team
Make sure your bookkeeping staff or your bookkeeper knows about the new credits and how to record relevant purchases.
Consult your tax advisor early
Share your updated records, estimates, and policies with your tax advisor well before year end so the credit claim process can be smooth.
Prepare for audits
Keep a clear and accessible audit trail. Be ready to show documents and notes if your credit claim is reviewed.
The new Corporate Investment Tax Credits are more than a tax perk. They reshape how you should think about capital spending, how you record your books, and how you plan growth. For businesses that invest in clean tech, electricity systems, carbon capture, or R&D, these credits may open a powerful path to tax savings — but only if your bookkeeping is ready.
A simple and disciplined accounting approach can make all the difference. If you tighten your records, tag credit-eligible items, note in-service dates, and keep a clean audit trail, you place yourself in the best spot to benefit from these credits. On the other hand, poor bookkeeping can mean money left on the table. You must always have a strong hold on the bookkeeping of your business. Meru Accounting provides outsourced bookkeeping services to firms around the world. As a Canadian business, you must always choose the best bookkeeping partner for your firm. Contact us now to know more about how Meru Accounting can help you with the new Corporate Investment Tax Credits.
FAQs
How can new Corporate Investment Tax Credits change the way a business logs capital purchases? They may push firms to record clearer details for each asset. This can include cost, use date, and vendor.
Why may bookkeepers need to track installation steps for assets tied to Corporate Investment Tax Credits? Some credits may need proof that the asset is fully set up. Clear notes can strengthen the claim.
Do Corporate Investment Tax Credits affect how a company stores its digital receipts? Yes, firms may need to store receipts in a clean and labeled way. This helps link each receipt to the right credit.
Can the new Corporate Investment Tax Credits require changes in chart of accounts? Some companies may add new accounts to track credit related assets. This keeps reports simple to read.
Why may a business need to create tags in its bookkeeping system for credit eligible assets? Tags can help filter assets that meet the rules. This saves time during credit review.
Do Corporate Investment Tax Credits affect monthly closing tasks? Yes, monthly checks may include updated asset logs. This can reduce year end stress.
Can the new credits change how businesses track partial payments on capital items? They may need to match each payment to the right entry. This keeps the audit trail clean.
Why might bookkeepers review vendor contracts for credit related purchases? Some credits may require full proof of what was bought. Contracts can show details that invoices may miss.
Do Corporate Investment Tax Credits affect how a company treats repairs and upgrades in the books? Repairs may not count but upgrades might. Bookkeepers may need to separate them with care.
Should firms keep notes on how much each asset supports clean or tech focused work for these credits? Short notes can show the link between the asset and the credit rules. This may help during review.
Can the new credits require a business to track project stages for long term builds? Yes, some credits apply only after key stages. Bookkeepers may log each stage to match rules.
Do Corporate Investment Tax Credits make fixed asset registers more important? They may turn the register into a main proof source. Clean registers can avoid claim issues.
Can these credits impact how long a business keeps backup files? Yes, firms may keep files longer in case of later audits. This may include receipts and logs.
Should bookkeepers track dates when assets stop working if they were tied to credits? Yes, end of use dates can matter if rules need it. This avoids confusion during claim checks.
Can Corporate Investment Tax Credits change how businesses handle shared assets across departments? They may need notes that show which part of the business uses the asset. Clear use notes can help claims.
Do these credits impact how bookkeepers prepare schedules for tax advisors? Yes, schedules may include more fields for proof. Advisors may rely on these to confirm claims.
Should firms keep photos of installed credit eligible assets? Photos can act as simple proof. They may help when documents do not show enough detail.
Can Corporate Investment Tax Credits affect the timing of when assets are entered into the books? Yes, late entries may weaken claim proof. Timely entries can support clean records.
Do these credits change how businesses plan their yearly asset reviews? Firms may do deeper reviews to confirm credit links. This may include checking dates and cost groups.
Why may a business need to track more data for assets that qualify for Corporate Investment Tax Credits? The credits may require stronger proof of purchase and use. Extra data can protect the claim.
