APPEAL

Nature of contract confirmed appellant was autonomous

Appellant sought revision of Minister’s decision that dismissed application for employment insurance. Minister affirmed that appellant was not employee for concerned corporation and worked as autonomous throughout his contract. Appellant claimed that employee status was not mentioned in job offer letter but was discussed personally with representatives of corporation. Appellant affirmed that activities were supervised and that corporation exercised control over him. Appeal not allowed. Absence of fixed working hours, control over appellant’s work and great flexibility to perform activity confirmed appellant’s status of self-employed. Court underscored that nature of contract, establishing prospective gains and losses, confirmed that appellant was autonomous.

Watzke v. M.N.R. (July 15, 2011, T.C.C., Miller J., File No. 2010-2371(EI); 2010-2372(CPP)) Reasons in French. 205 A.C.W.S. (3d) 980 (8 pp.).

GROUNDS

Claim that auditors pilfered boxes of documents not substantiated

Motion by director of taxpayer for order for contempt. Minister assessed director under Excise Tax Act (Can.) as liable for tax debt of corporation. Director filed appeal. Director’s motion for disclosure of certain documents was granted. Motion dismissed. Director did not provide even prima facie case that order for documents had not been complied with. Director provided list of documents he claimed were being withheld, but this list suffered from vagueness. Claim that auditors pilfered boxes of documents was not substantiated and could not form basis for contempt order against Crown. Order granting appeal would be inappropriate on preliminary motion. Exercise of due diligence was not proper ground for allowing appeal and could only be determined with full hearing. Minister had not breached costs order. Dismissal of tax-related criminal charges against director did not provide support for motion.

Lougheed v. Canada (Aug. 26, 2011, T.C.C., Woods J., File No. 2006-2031(GST)G) 96 W.C.B. (2d) 278 (10 pp.).

GOODS AND SERVICES TAX

While transfer amounted to negligence, action did not constitute gross negligence

Appeal by taxpayer from reassessment by Minister. Taxpayer transferred house it was building to its two shareholders. Taxpayer did not collect or remit GST on transfer. Minister assessed taxpayer on basis that it transferred both legal and beneficial interest in property to its shareholders, thereby resulting in supply of property on which GST was required to be collected pursuant to ss. 165 and 221 of Excise Tax Act (Can.). Minister imposed gross negligence penalty. Appeal allowed in part. Matter was referred back to Minister for reassessment on basis that s. 285 gross negligence penalty be deleted. Taxpayer was liable to collect and remit GST on transfer of property. Taxpayer failed to establish requisite certainty of intention establishing that property was in trust for taxpayer subsequent to transfer of title. While transfer by taxpayer amounted to negligence, action did not constitute gross negligence. Shareholders held subjective belief that taxpayer maintained some interest in property given that it continued to pay expenses related to it.

Canpar Developments Inc. v. Canada (Aug. 2, 2011, T.C.C., Paris J., File No. 2009-3264(GST)I) 205 A.C.W.S. (3d) 588 (7 pp.).

ENTITLEMENT

Lump sum given for loss of employment qualified as retiring allowance and excluded from insurable earnings

Appellant took maternity leave. Employer paid amounts to appellant to top up maternity leave. Employer terminated appellant’s employment. Appellant’s position was eliminated and replaced with reclassified position. Appellant received lump sum for loss of employment. Appellant applied for unemployment benefits. Appellant was informed appellant did not qualify for benefits. Appeal was dismissed. Lump sum given for loss of employment qualified as retiring allowance which was excluded from insurable earnings. Amendment made to Insurable Earnings and Collection of Premiums Regulations (Can.), excluded from insurable earnings maternity leave top up.

Geddes v. M.N.R. (Aug. 8, 2011, T.C.C., D’Auray J., File No. 2010-3092(EI)) 205 A.C.W.S. (3d) 406 (8 pp.).

GOODS AND SERVICES TAX

No actions taken by directors to prevent failure to remit HST

Appeal by directors from assessments by Minister under Excise Tax Act (Can.). First Nation was preferred shareholder of corporation. Restaurant on reserve was corporation’s only asset. At board meeting, band presented directors with proposal to put restaurant into bankruptcy. Subsequent to board meeting, two directors worked with company to develop recovery plan. Two directors resigned as directors in February 2007, and restaurant was closed in November 2007. Minister assessed each of two directors, under s. 323 of Part IX of Act, $34,584.84 in respect of failure of corporation to remit net tax in respect of reporting periods ending September 30th and December 31 2006, interest and penalties. Two directors filed notices of objection to assessments. Minister confirmed assessments. Appeals dismissed. Two directors were jointly and severally, or solidarily, liable under s. 323(1) for corporation’s failure to satisfy its remittance obligations under Act. No evidence of actions taken by two directors to prevent failure by corporation to remit HST was provided. It was clear that first director was aware of corporation’s failure to remit its net tax on statutory filing dates. First director should have taken some positive steps to ensure that corporation made HST remittances in timely fashion. First director had not established, on balance of probabilities, that he exercised required degree of care, diligence and skill to prevent failure to remit. It was clear that second director was aware that corporation was suffering from financial difficulties at end of 2005. Second director took no positive steps to assure himself that corporation was remitting HST. Second director could not avail himself of due diligence defence provided in s. 323(3).

Power v. Canada (July 27, 2011, T.C.C., D’Arcy J., File No. 2010-1670(GST)I; 2010-1671(GST)I) 205 A.C.W.S. (3d) 272 (18 pp.).

GOODS AND SERVICES TAX

Minister not statute-barred from assessing taxpayer more than four years after corporation filed returns

Appeal by taxpayer from assessment by Minister under Excise Tax Act (Can.). Taxpayer was director of corporation. Corporation failed to remit GST for reported period ending February 28, 1994 to May 31, 1999. Taxpayer was assessed by way of director’s liability assessment. Appeal dismissed. Minister was not statute-barred from assessing taxpayer more than four years after corporation filed its returns. Due diligence defence was not applicable. Taxpayer could not successfully argue that he was assessed more than two years after ceasing to be director.

Siow v. Canada (June 14, 2011, T.C.C., Pizzitelli J., File No. 2008-3820(GST)G) 204 A.C.W.S. (3d) 938 (19 pp.).