Introduction

Closing a medical practice — whether due to retirement, a career change, a move, or health reasons — involves a set of administrative and tax obligations that must be completed correctly. For an incorporated physician, the closure affects not just the practice's operations but the professional corporation's compliance obligations across payroll, HST, and income tax.

Scenario: Dr. Yuen Closes Her Family Practice After 22 Years

Dr. Yuen is a family physician in Burlington. She has operated through a medical professional corporation for fourteen years. She has decided to retire at 61 — earlier than initially planned. Her MPC has approximately $1.1 million in retained earnings, employed two administrative staff, and billed OHIP monthly for the duration of her practice.

Her last billing date to OHIP is March 31, 2026. She intends to close the clinic by June 30, 2026.

Step 1: Payroll Wind-Down

Dr. Yuen's two administrative employees are being terminated. She must:

Issue Records of Employment (ROEs) within five calendar days of the last day worked. Errors in the ROE — incorrect pay period, missing information — can delay the employees' EI claims and create an ESA compliance issue.

Issue T4s for the year, covering employment income through the termination date. These are due by the last day of February of the following year, but preparing them promptly ensures accuracy.

Remit final source deductions — including deductions from the final paycheques and any vacation pay or termination pay — on the next remittance due date.

Close the RP payroll account with the CRA once all T4s are filed and all remittances are completed.

Step 2: HST Account

Dr. Yuen's MPC is registered for HST. Although most OHIP billings are exempt (no HST), the MPC may have been collecting HST on non-insured services or taxable supplies (cosmetic procedures, third-party reports, product sales).

She must:

File a final HST return covering the period from the last reporting period through the deregistration date.

Remit any outstanding HST balance.

Close the RT HST account with the CRA. The account is closed by notifying the CRA of the business cessation date.

If the MPC owned any taxable property (clinic equipment) that was used in commercial activities and for which ITCs were previously claimed, there may be a deemed supply on cessation — an HST self-assessment on the fair market value of those assets at the time they are removed from commercial use.

Step 3: The Corporate Tax Position After Closure

Once billings stop, the MPC's income is entirely passive — investment income on the $1.1 million in retained earnings. The SBD on active business income is no longer relevant because there is no active business income. The MPC pays the high corporate passive rate on investment income going forward.

Dr. Yuen should begin the distribution planning: identify the CDA balance, plan the sequence of distributions as discussed in Articles 112 and 119, and ensure the compensation decision for the year of closure reflects the partial-year billings through March 31.

Step 4: The College Notification

Dr. Yuen must notify the CPSO of the closure and manage the patient transfer requirements — ensuring patients have access to records and are directed to alternate care. These are professional regulatory obligations separate from the tax and corporate obligations, but they have an administrative timeline that affects the overall closure plan.

Step 5: The OHIP Billing Account

The OHIP billing number continues to exist until Dr. Yuen actively notifies the Ministry of Health of her retirement and requests deregistration. Leaving the billing account open after practice ceases does not create ongoing obligations — OHIP simply pays nothing if no claims are submitted — but formal closure is cleaner for compliance purposes.

The Long-Term Corporate Position

After the closure, Dr. Yuen's MPC continues to exist as long as she chooses. It is not required to be wound up. It continues to file T2 returns, pay passive income tax, and distribute dividends annually as part of Dr. Yuen's retirement income plan.

Alternatively, the MPC can be wound up in a structured process — distributing its remaining assets and dissolving the corporation. The timing of the wind-up should be determined based on the retirement drawdown plan, the CDA balance, and the personal income picture each year.

When to Speak With a CPA

Dr. Yuen's CPA should be engaged at least six months before the intended closure date — to plan the payroll wind-down, HST deregistration, year-of-closure corporate income, and the transition to the retirement drawdown model.

Rotaru CPA works with physicians through the practice closure process and the transition to corporate retirement income management. Book a consultation to plan your closure.