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CRA Collection Powers

Métaux Kitco inc. (Syndic de), 2016 QCCS 444 — CRA(RQ) may not set-off disputed GST ITCs in CCAA (Quebec)

This Québec Superior Court applies some reasoning similar to the Ontario Court of Appeal in Schnier.   (See esp. para. 121.  The Court specifically refers to Schnier at para. 123, FN72.) Essentially, the Court concluded that Revenue Québec (acting for itself and for CRA) could not set-off (under ETA s. 318) a disputed ITC reassessment (for over $313 million) from the pre-CCAA period against valid ITCs (and QC ITRs) for the post-CCAA… Read More »Métaux Kitco inc. (Syndic de), 2016 QCCS 444 — CRA(RQ) may not set-off disputed GST ITCs in CCAA (Quebec)

SNF LP v The Queen, 2015 TCC (Rip J.) — If you made necessary inquiries as to whether the person had a proper GST number when you started dealing, that is sufficient to claim ITCs unless you are alerted to a suspicious change

This could be an extremely helpful decision for businesses dealing with multiple suppliers and trying to assess how much checking they must do on suppliers before safely claim input tax credits. There were cues in this case that might have alerted this large institutional scrap metal dealer that something was wrong with these 12 suppliers.   Some used the same business address. A few used… Read More »SNF LP v The Queen, 2015 TCC (Rip J.) — If you made necessary inquiries as to whether the person had a proper GST number when you started dealing, that is sufficient to claim ITCs unless you are alerted to a suspicious change

Conocophillips Canada Resources Corp. c. Canada (National Revenue), 2016 FC 98 (Boswell) — If you miss the deadlines for filing a Notice of Objection, you can still ask CRA to waive the requirement

This decision could dramatically change a taxpayer’s options where it misses the time limit for filing a notice of objection. The general rule is that where a taxpayer misses the deadline for filing the notice of objection (90 days after assessment) plus the additional one year time limit within which to apply for an extension, the taxpayer has no relief.  (See ITA s. 165(1)(b) (90-day limit), 166.1(7)(a)… Read More »Conocophillips Canada Resources Corp. c. Canada (National Revenue), 2016 FC 98 (Boswell) — If you miss the deadlines for filing a Notice of Objection, you can still ask CRA to waive the requirement

SMITH v ATTORNEY-GENERAL OF CANADA et al, 2016 ONSC 489 (D.A. Broad) — you cannot stop CRA collection action in provincial superior Courts

This decision applies ​the reasons in 861808 Ontario Inc. v. Canada (Revenue Agency) 2013 ONCA 604 (CanLII) to the case of a Canadian Forces retiree seeking to protect his federal pension from CRA set-off​.  The applicant’s (it was an application, though it claimed damages) thesis was that he was seeking damages, which claim is not the kind of declaratory relief over which the Federal Court has exclusive jurisdiction… Read More »SMITH v ATTORNEY-GENERAL OF CANADA et al, 2016 ONSC 489 (D.A. Broad) — you cannot stop CRA collection action in provincial superior Courts

Schnier v. Canada (Attorney General), 2016 ONCA 5 (DM Brown) — if you plan bankruptcy, it’s important to file your Tax Court appeal first 

This decision of the Ontario Court of Appeal suggests that a taxpayer who plans to relieve a tax debt through bankruptcy should file a Tax Court appeal first in order to have CRA’s claim treated as a contingent liability so that the special rules favouring the Crown do not apply. “[6]         The issue, then, on this appeal is a narrow one: In calculating Mr.… Read More »Schnier v. Canada (Attorney General), 2016 ONCA 5 (DM Brown) — if you plan bankruptcy, it’s important to file your Tax Court appeal first 

Kuchta v. The Queen 2015 TCC 289 (Graham) — spouses survive death for purposes of s. 160 relationship test

In Kiperchuk v. The Queen 2013 TCC 60, Justice Lamarre (now the ACJ) said that a spouse was not liable for her deceased spouse’s tax debts under s. 160, for designated RSP funds she got on his death.  In this decision, Justice Graham agreed with Justice Lamarre that one assesses whether parties are related at the time of transfer, not at some earlier or later time.  (Para.… Read More »Kuchta v. The Queen 2015 TCC 289 (Graham) — spouses survive death for purposes of s. 160 relationship test

Ellis v. The Queen 2015 TCC 285 (Hogan)  — Crown must prove transferor’s debt (including liability for penalties) in s. 160 cases, even where transferor and transferee are spouses

[9]             I agree with the Appellant that the Respondent bears the initial burden of establishing the Transferor’s tax debt. [10]        In Beaudry v. The Queen,[1] my colleague Tardif J. describes the Crown’s burden in the context of a subsection 160(1) assessment as follows: [26] There is an exception, and Archambault J. dealt with that exception inGestion Yvan Drouin: Since it is the Minister who takes measures against a third party… Read More »Ellis v. The Queen 2015 TCC 285 (Hogan)  — Crown must prove transferor’s debt (including liability for penalties) in s. 160 cases, even where transferor and transferee are spouses

Martin c. La Reine 2015 CCI 118 (D’Auray) – CRA could seize your RSP, even after bankruptcy, and then you must pay tax on the amount seized 

In this case, CRA Collections registered a lien against Ms. Martin’s assets in 2008, before she declared bankruptcy. CRA chose not to participate in the bankruptcy, relying on its lien and its status as a secured creditor.  Ms. Martin was discharged from bankruptcy in December 2009 and in January 2010 CRA began steps to realize its lien against her RSP.  RSPs are explicitly excluded from… Read More »Martin c. La Reine 2015 CCI 118 (D’Auray) – CRA could seize your RSP, even after bankruptcy, and then you must pay tax on the amount seized 

Benaroch c. La Reine 2015 CCI 91 (Favreau)  — CRA must prove corporation’s failure to pay before pursuing its directors – r 138 motion

This was a non-arm’s length transfer case involving GST.  The appellant’s spouse transferred to him part of the value of a jointly owned home.  She owed money for a directors’ liability assessment. The appellant challenged his wife’s liability.  At the hearing, the Crown failed to include evidence proving that the corporation’s debt was unsatisfied when the wife was assessed. (This is an application of the… Read More »Benaroch c. La Reine 2015 CCI 91 (Favreau)  — CRA must prove corporation’s failure to pay before pursuing its directors – r 138 motion

Maxwell v. The Queen 2015 TCC 74 (D’Arcy) — Director is only liable for corporation’s tax debts up to amount shown in Federal Court certificate 

The Federal Court certificates which CRA filed against the corporate tax debtors was less than the amounts assessed against the director. So Justice D’Arcy reduced the director’s liability down to the amounts shown in the certificates.  Justice D’Arcy relied on the wording of the directors’ liability rules which he summarizes:   [10]        [ITA] Section 227.1 places certain limitations on the director’s liability. Two of these… Read More »Maxwell v. The Queen 2015 TCC 74 (D’Arcy) — Director is only liable for corporation’s tax debts up to amount shown in Federal Court certificate 

McCartie v. Canada (National Revenue), 2015 FC 222 (Zinn) – CRA can register you for GST even if you don’t agree

[22]           The CRA also submits that any issues relating to whether Mr. McCartie owes a GST debt, falls within the jurisdiction of the Tax Court of Canada and says that Mr. McCartie’s allegation that the CRA does not have the constitutional authority to register his GST account is a disguised attack on the validity of the GST debt.  The owing of GST, it… Read More »McCartie v. Canada (National Revenue), 2015 FC 222 (Zinn) – CRA can register you for GST even if you don’t agree

Budwal v. The Queen, 2014 TCC 370 (Hogan) — You might reduce a shareholder benefit liability by the amount of your liability under s. 160 for non-arm’s length transfers 

Here is a very interesting argument on s.  160 assessments. Hogan J.  makes this in a footnote in a s.  160 assessment within a corporate context where there was a corresponding s.  15 (1) assessment.    “[FN 2]   The argument is that the benefit under subsection 15(1) of the Act should be reduced by the liability under section 160 of the Act because the appropriation… Read More »Budwal v. The Queen, 2014 TCC 370 (Hogan) — You might reduce a shareholder benefit liability by the amount of your liability under s. 160 for non-arm’s length transfers 

Kardaras v. The Queen, (2014 TCC Pizzitelli) — You must go to provincial court if you want an order confirming a tax debtor held property for you under “constructive trust”

CRA can pursue one spouse for the other’s tax debts, if the tax debtor transfers property to his spouse for less than fair market consideration.  This case involved GST and the CRA’s power under subsection 325(1) of the Excise Tax Act.  (Section 160 is the matching rule under the Income Tax Act.)   As one of her defences, the Appellant, Ms. Karadaras, argued that her husband held the transferred… Read More »Kardaras v. The Queen, (2014 TCC Pizzitelli) — You must go to provincial court if you want an order confirming a tax debtor held property for you under “constructive trust”

Sarrazin c. La Reine, 2014 CCI Favreau — Don’t give gifts to or accept gifts from family members who may owe tax debts

A father gifts land worth about $64,000 to his son.   The son sells the land back to the father about a week later for $2000. At the time of the transfers, the son owed sales taxes of about $60,000. Was the father liable for the son’s tax debts ETA s. 325(2), based on the below-market non-arm’s length transfer under ?  Yes, said Justice Favreau.   One can’t tell… Read More »Sarrazin c. La Reine, 2014 CCI Favreau — Don’t give gifts to or accept gifts from family members who may owe tax debts

Toronto-Dominion Bank v. Comrie and Comrie, (2014 ONSC Coats) — Ontario Finance has priority over mortgagees for unpaid retail sales tax

Suppose you lend money to someone and take a mortgage as security.  Unknown to you, the debtor owes provincial retail sales tax.  Does the Crown’s Retail Sales Tax Act claim have priority over your mortgage?  Justice Coats says it does.   This view may shock some, as it suggests that a RSTA tax liability has priority over all security interests, even if the security is taken before the tax debt… Read More »Toronto-Dominion Bank v. Comrie and Comrie, (2014 ONSC Coats) — Ontario Finance has priority over mortgagees for unpaid retail sales tax

Strachan v. The Queen, (2013 TCC Rip CJ) —  If you let your spouse buy shares in your corporation for less than fair value, your spouse can be liable for your tax debts

If you have your corporation issue shares to your spouse for less than fair market value, have you “transferred” something valuable to your spouse?  Yes, you gave up a share of the value of the corporation.  So, if you owed taxes at the time of the share issue, your spouse must pay your tax debts up to the value of the shares (less what your… Read More »Strachan v. The Queen, (2013 TCC Rip CJ) —  If you let your spouse buy shares in your corporation for less than fair value, your spouse can be liable for your tax debts

Canada c. Lemire, (2013 CAF Noel) and Canada v. 9101-2310 Québec Inc. (2013 FCA Noel) — If your spouse or other non-arm’s length tax debtor uses your account to clear cheques, you could be liable to pay his tax debts.

Suppose your spouse, a child or other “non-arm’s length” person asks you to let him deposit money in your bank account, perhaps because he has no account, creditors are threatening collection action, or the bank holds the funds on deposit too long for his business needs.  Is it safe to help out?  After these two FCA decisions, it seems safer than before, but still it’s… Read More »Canada c. Lemire, (2013 CAF Noel) and Canada v. 9101-2310 Québec Inc. (2013 FCA Noel) — If your spouse or other non-arm’s length tax debtor uses your account to clear cheques, you could be liable to pay his tax debts.

Brent Kern Family Trust v. The Queen, (2013 TCC Boccok) — The more twists in your tax plan, the more places it can break: tax avoidance plan, using anti-avoidance rule for trusts, fails

This case is a great example of how, in the tortured world of tax avoidance, one taxpayer’s success can wreck another’s tax plan.  Mr. Kern set up the Brent Kern Family Trust to take advantage of an anti-avoidance rule.  This rule, in ITA s. 75(2) prevents high income taxpayers from splitting income with low-income taxpayers (usually family members).  The rule says that, despite the transfer to the trust, any… Read More »Brent Kern Family Trust v. The Queen, (2013 TCC Boccok) — The more twists in your tax plan, the more places it can break: tax avoidance plan, using anti-avoidance rule for trusts, fails

Almoradi v. The Queen (2013 TCC, Bedard) — If someone who owes taxes gives you a gift, you may have to pay the taxes

Both the income tax and GST laws have rules that can make you liable for someone else’s tax debts.  If you take money or other property from a related person (such as a spouse, or, as in this case, a corporation you control), and that person owes taxes, you are liable to pay the taxes, unless you gave fair value for the property you got. … Read More »Almoradi v. The Queen (2013 TCC, Bedard) — If someone who owes taxes gives you a gift, you may have to pay the taxes

9101-2310 Quebec 2012cci (Archambault) — Deposits to an agent’s bank account are not transfers

In this 40-page decision, Justice Archambault says that a person who takes money as agent of a tax debtor does not get a transfer which CRA can attack.  A principal does not transfer property to his agent.  This is one of a series of cases in which Tax Court justices show their reluctance to allow CRA to collect money from people who never had any… Read More »9101-2310 Quebec 2012cci (Archambault) — Deposits to an agent’s bank account are not transfers