Similar contract would not have been concluded if parties were at arm’s length

Tax court of Canada | Public Law | Social programs | Employment insurance

Minister informed taxpayer that his employment did not constitute insurable employment for purposes of Employment Insurance Act. Minister not convinced that similar contract would not have been concluded if parties were at arm’s length. Taxpayer appealed. Minister sought to amend reply to notice of appeal to plead alternatively that taxpayer would have chosen not to be shareholder of employer in order to be eligible for employment insurance or that he controlled more than 40 per cent of shares of employer Appeal dismissed. Amendment refused on ground that it would prejudice taxpayer and not meet rules of procedural fairness. Factors identified in s. 5(3)(b) of Act include: compensation paid, terms and conditions of employment, length of employment, nature and extent of work. Burden of proof was on taxpayer. Taxpayer’s wife owned 100 per cent of shares of employer. Taxpayer obtained contract with telecommunications company T but was required to use wife’s company for payment of salary. Annual salary of $ 75,000, did not correspond to average salary of engineer with experience comparable to taxpayer’s. Salary was reduced without reduction in hours. Taxpayer was bound by employment contract with employer since all essential elements were met at the beginning of period. Taxpayer set his own salary and adjusted it as he saw fit, even though T continued to pay amounts due to employer under project management contract. Taxpayer loaned salary to employer as he saw fit. Wife did not make any of decisions concerning employer or taxpayer’s work. Minister’s decision was reasonable. 

Kassawat c. M.R.N. (2018), 2018 CarswellNat 1077, 2018 CarswellNat 1265, 2018 TCC 54, 2018 CCI 54, Dominique Lafleur J. (T.C.C. [Employment Insurance]).

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