the breadth of CRA’s ability to collect from third parties

An April 16, 2015 Tax Court of Canada case (Benaroch vs. H.M.Q., 2012-4385(GST)G) addressed a series of transfers of tax liabilities. The taxpayer’s spouse (Mrs. A), the Director of a Corporation, had been previously assessed $67,424 for the Corporation’s unremitted GST/HST. Mrs. A transferred cash and other assets to her spouse (Mr. A), resulting in CRA assessing Mr. A for the GST/HST owed by his spouse (Section 325 of the Excise Tax Act (ETA)).

Taxpayer wins
Assessing a Director for unremitted GST/HST requires CRA to first execute a Writ of Seizure and Sale against the corporation, and have this Writ returned unsatisfied (ETA Paragraph 323(2)(a)). CRA was not able to prove this. As a result, the Mrs. A did not owe taxes under the ETA. Therefore, there was no liability to transfer to Mr. A.

Editors’ Comment
In order to hold a director liable, the CRA must demonstrate its inability to recover the amounts directly from the corporation. See CRA Guide IC89-2R3 for more information.