GOODS AND SERVICES TAXNo actions taken by directors to prevent failure to remit HSTAppeal 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.).
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GOODS AND SERVICES TAXMinister not statute-barred from assessing taxpayer more than four years after corporation filed returnsAppeal 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.).
CONTRIBUTIONSWorker was in subservient positionAppeal by payor from decisions by Minister determining that worker was employed in insurable and pensionable employment pursuant to s. 5(1)(a)of Employment Insurance Act (Can.), and s. 6(1)(a) of Canada Pension Plan. Payor provided residential plumbing services. Appeal dismissed. Worker was employee and not independent contractor. Worker was performing his services on behalf of payor and not as person conducting business on his own account. At end of day, customers were those of payor and not of worker. If damages occurred at work site, it was payor that incurred cost of rectifying problem. There was maximum amount worker could earn, and his risk for financial loss was limited. Worker was in subservient position. Worker was on call every day, was told where to go and his hours and location throughout day were monitored.
177398 Canada Ltd. v. M.N.R. (June 14, 2011, T.C.C., Campbell J., File No. 2010-2412(EI); 2010-2413(CPP)) 204 A.C.W.S. (3d) 936 (10 pp.).
Amount paid directly to independent adult daughter could not be considered child supportAppellant was divorced. Appellant’s daughter, aged 20, was studying in university. Daughter brought action to obtain financial support from appellant. Appellant paid $2,125 for the year to his daughter according to terms of judgment. When appellant filed his income tax he claimed deduction of $2,125 in child support. Minister reassessed appellant and disallowed deduction. Appellant appealed. Appeal dismissed. Amount paid directly to independent adult daughter could not be considered child support. Former spouse did not receive any of the amount paid. Larouche v. Canada (June 29, 2011, T.C.C., Favreau J., File No. 2010-3669(IT)I) Reasons in French. 203 A.C.W.S. (3d) 884 (6 pp.).
Appellant used amount borrowed to give gifts to relatives and buy homeAppellant was sole shareholder and director of corporation. In 2000 corporation loaned appellant $5 million. Appellant paid interest on loan but corporation allowed him to keep the capital and made no attempts to recover it. According to appellant corporation forgave loan since corporation was going to be sold to public corporation. In 2002, Minister reassessed appellant and added $5 million to his declared income. Appellant appealed. Appeal dismissed. Even though reassessment was late it was still valid. Appellant did not suffer any prejudice from late reassessment. Appellant used amount borrowed to give gifts to his relatives and to buy home. Commercial debt was not a condition to include amount in appellant’s income. Remillard v. Canada (June 29, 2011, T.C.C., McArthur J., File No. 2009-1660(IT)G) Reasons in French. 203 A.C.W.S. (3d) 881 (17 pp.).
GOODS AND SERVICES TAX
Work to building not sufficient enough for building to be considered as having been renovatedAppeal from denial by Minister of Revenue for Quebec of application for GST rebate for new residential complex or one that had undergone substantial renovation. Cost of renovation work totalled $45,910. Application denied because interior of existing part of residence before work not renovated. Appeal dismissed. Basement could not be taken into account in determining whether minimum requirement in definition of major renovations had been met because it was only partially completed. Addition of basement even if considered habitable area and entrance hall did not double surface area of habitable areas of residence and more importantly did not create new residential complex because residence remained mostly intact. Work carried out by appellant constituted major renovations within ordinary meaning of expression and for purposes of ecoENERGY program. However, definition of expression substantial renovations in s. 256(2) of Excise Tax Act (Can.), very restrictive since it excludes work that theoretically should be considered major such as work to foundation, exterior walls, interior support walls, floors, roof and stairs. Work to building not sufficient enough for building to be considered as having been renovated or altered to such an extent that all or substantially all of building removed or renovated.
Nadeau v. Canada (May 6, 2011, T.C.C., Favreau J., File No. 2010-523(GST)I) 203 A.C.W.S. (3d) 666 (7 pp.).
CONTRIBUTIONSUnderlying entrepreneurial independence in way intervener conducted himselfAppeals from decision of Minister of National Revenue that employment of intervener was insurable under Employment Insurance Act (Can.), and pensionable under Canada Pension Plan. Appellant operated three enclosed trucks in which carpet cleaning units had been installed. Truck mounts provided power supply to cleaning equipment mounted in truck itself. Appellant paid for all cleaning supplies and paid for maintenance of truck mounts. Intervener would prepare invoice to calculate percentage after job complete and appellant would pay him as independent contractor. Remuneration paid to subcontractors including intervener determined by appellant. Appeal allowed and decision of Minister varied to find that intervener was not engaged in insurable and pensionable employment with appellant. Intervener worked when he wanted to work. Intervener free to turn down work. There was a business being engaged in by intervener. Underlying entrepreneurial independence in way intervener conducted himself. Mutual intention of parties not to engage in contract of service. Intervener intended to take full advantage of independent contractor status.
Alert Carpet Cleaning (Niagara) Inc. v. M.N.R. (June 24, 2011, T.C.C., Hershfield J., File No. 2010-1506(EI); 2010-1505(CPP)) 203 A.C.W.S. (3d) 549 (25 pp.).
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Tax Court of Canada
For a snippet of this week's stories, check out the Ontario Legal News Update. 
For a snippet of this week's stories, check out the Ontario Legal News Update. 
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