Payroll account (RP account)

An asset buyer who hires the seller’s staff is a new employer for payroll purposes. That is where the payroll account comes in: the remittances for deductions from the buyer’s payroll are reported under it, and the seller’s account stays the seller’s.

How it works

The CRA describes a payroll deductions account as an account number assigned to an employer, a trustee or a payer of other amounts for employment. The CRA’s employers’ guide says an employer who needs a payroll program account and already has a business number only needs to add the account to it. An employer without a business number must ask for one and register before the first remittance is due. The guide also has a section on successor employers who acquire all or part of a business, which describes how, under certain circumstances, deductions already withheld by the previous employer may be taken into account.

What to check or ask

• Whether the buyer already has a business number, or must register for one before the first remittance
• Whether the buyer is treated as a successor employer for CPP and EI purposes
• Whether the seller’s payroll account will be closed after closing, and who handles that

The practical setup is covered in how to set up bank and payroll accounts after buying a business. Related: source deductions.