Bradley Jacoby Games Chartered Professional Accountants | Victoria, BC | 250-370-2191

Director’s Liability: Helping Out Family

Being a director of a corporation comes with many responsibilities. Failing to exercise due diligence in ensuring source deductions (such as EI, CPP, and income tax) are properly withheld from wages and remitted to CRA may result in a director’s personal liability for the corporation’s outstanding amount. A June 12, 2018 Tax Court of Canada case examined whether an individual who set up a corporation (along with a bank account) for his brother to operate…

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Directors: Can They Be Liable for Corporate Income Taxes?

A December 11, 2017 Tax Court of Canada case examined whether a taxpayer was liable for unpaid income taxes of the corporation of which he was a director. CRA’s assessment was based on the assertion that the taxpayer was a legal representative of the corporation and had distributed assets of the corporation without having first obtained a clearance certificate from CRA. A clearance certificate essentially confirms that the corporation has paid all amounts of tax,…

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Employer-Sponsored Social Events: After the Party

In an April 9, 2018 French Technical Interpretation, CRA clarified their position on taxable benefits arising from employer-sponsored social events, such as a holiday party or other event. Where the cost of the social event does not exceed $150/person (previously the limit was $100), excluding incidentals such as transportation, taxi fares and accommodations, there would be no taxable benefit to employees. CRA indicated that the cost should be computed per person who attended, and not per person invited. If the cost exceeds $150/person, the entire amount, including the additional cost, is…

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Construction Activities: Reporting Obligations for Subcontractors

A July 17, 2017 Technical Interpretation examined the conditions which would require the filing of a T5018, Statement of Contract Payments. Where a person or partnership primarily derives their business income from construction activities for a reporting period, a T5018 should be filed for any subcontractor payment or credit made relating to goods or services received in the course of construction activities. The reporting period may be a calendar or fiscal year but cannot be…

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Reasonable Vehicle Allowances: GST/HST Claim

A travel allowance paid to an employee for the use of their personal vehicle for business purposes will be non-taxable if it is reasonable. Where such reasonable allowances are paid, an input tax credit (ITC) may be claimed by the employer. The ITC is computed as the imputed GST/HST in the allowance, without adjustment for the fact that some costs likely did not attract GST/HST. In non-harmonized provinces/territories (such as Alberta and BC), the ITC would be 5/105 of the allowance. The ITC in a harmonized province is different.…

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Family Members: Can I Pay Them a Salary?

For a small business, whether operated as a corporation, proprietorship or partnership, it is quite possible that relatives of the owners or partners may be engaged as employees. Due to the closer familial relationship between employer and employee, CRA pays particular attention to ensure that the salary is truly an eligible deduction to the business. According to CRA, salaries to children and spouses are deductible as long as all of these conditions are met: the…

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Business Failure: Personal Liability for Corporate Tax Debt

There are special laws which hold a director personally liable for certain amounts that their corporation fails to deduct, withhold, remit, or pay. Most commonly, these amounts include federal sales tax (GST/HST) and payroll withholdings (income tax, EI and CPP). It does not generally include normal corporate income tax liabilities. In a June 22, 2017 Tax Court of Canada case, at issue was whether the director of a corporation could be held liable for $66,865…

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Checking Up On Suppliers Regarding GST/HST?

INPUT TAX CREDITS: Checking Up On Suppliers Do I have to check up on a supplier when paying them GST/HST? Yes! In a January 29, 2016 Tax Court of Canada case it was noted that CRA had denied over $500,000 of input tax credits (ITCs), and assessed penalties and interest, in respect of GST and QST paid to twelve suppliers. Unknown to the taxpayer, the suppliers did not remit the tax. The taxpayer, a scrap…

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