Tax & Trade Blog

When things go awry in one’s business or personal affairs, taxes often get neglected. The Canada Revenue Agency (CRA) does not forget about these tax obligations, however, and has extensive collections powers available to it, including “directors liability” assessments which can transform corporate tax debts into personal tax debts of the affected directors.

The question that many directors and affected personal taxpayers often ask is whether these personal tax debts can be avoided on personal bankruptcy.

The answer is that “it depends”. Recent case law has been swinging toward forcing substantial payments by bankrupts where there are taxes owing to the CRA, as was seen in a recent British Columbia Supreme Court decision in Re Van Eeuwen [2012] GSTC 142.

Instead of filing a notice of objection, a taxpayer may enter into negotiations with the Canada Revenue Agency (CRA) with the purpose of resolving tax issues in dispute.  When a settlement is reached, the CRA may request the taxpayer to sign a waiver, agreeing to the proposed changes to the assessment and confirming that the taxpayer will not appeal the assessment (made on the agreed terms) to the Tax Court of Canada (TCC).  Such waiver of right is expressly provided for in sections 301(1.6) and 306.1(2) of the Excise Tax Act (ETA) and sections 165(1.2) and 169(2.2) of the Income Tax Act (ITA).

Like any contractual agreements, undue pressure, lack of proper legal advice, or unconscionable bargains may void a settlement agreement. The Federal Court of Appeal (FCA) recently confirmed in Taylor v. The Queen (2012 FCA 148) that a waiver of right to object or appeal an assessment signed by a taxpayer pursuant to a settlement is valid and binding on the taxpayer.

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EHT & "ASSOCIATED" EMPLOYERS

GETTING THE FULL EXEMPTION AMOUNT

Employer Health Tax (“EHT”) is a part of our overall Indirect Tax practice, and a common EHT question we get is whether two corporations are “associated employers” for the tax. Being associated is problematic, as it essentially makes each employer pay more than if they were unrelated.

While this may seem like a straightforward bedrock question (is "Aco" associated with "Bco"), there is some confusion as to how the technical rules apply (even, it appears, at the Ontario Ministry of Finance (“MOF”) – at least based on some recent Ontario assessment positions that we have seen).