Tax & Business News
Trips, tips and traps
April 2016
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Links For April
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Latest info from StatsCan
Population estimate
36,048,521
CPI Annual Inflation
1
.4%
Unemployment Rate
7
.1%
GDP Monthly growth
0.6%
Forward this email to a friend!
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The Federal budget was released after the last newsletter and many pundits have opined but I like the CFIB take on matters as they are the most likely to have small business interests in mind.
So, aside from broken promises for which we are gratefully inured, the enhancement of CPP and projected deficit will insure the increase in tax revenues to meet these ongoing obligations.
While some costs have risen, the cost of meeting with cabinet ministers to advocate for you remains unchanged from $9,975-a-plate dinner to meet with Alberta's premier, to a $2,500 private reception to help pay off a MPP's election debt. There appears to be no distinction amongst the three major political parties in this regard.
The recent allocation of $440 million to boost Revenue Canada's reach for recalcitrant taxpayers will enhance the existing snitch line and whistle-blower compensation. That local small business be included in the sweep may not be unreasonable to expect.
Someone's got to pay for all this and it always falls to the taxpayer.
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Permanent Links
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PAYROLL
TAXES
CALCULATORS
MISCELLANEOUS
SENIOR'S CORNER
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| Calendar of Important Dates |
 Corporations with a January year end, claiming the small business deduction must pay the balance of tax owing by the end of April.
Corporations with a February year end, not claiming the small business deduction must pay the balance of tax owing by the end of April.
Filing deadline for an October 31, 2015 year end is April 30
, 2016
Passover - Friday April 22 - Saturday April 30, 2016
May 2 - Personal Tax Return filing deadline
Next Issue - May 9, 2016
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VOLUNTARY DISCLOSURE
Beat the government...
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The threat of enhanced CRA investigative powers finances by the new government may provide an incentive to come forward if a taxpayer has unreported income rather than risk detection by CRA auditors.
The Voluntary Disclosure Program (VDP) is one of CRA's more successful initiatives and provides a safe haven for those meeting their criteria. But timing is everything. If CRA launches inquiries before a VDP submission, all advantage is lost and penalties and interest will abound unfettered.
The exposure of the Panama Papers is a sober reminder that while institutions may be trusted, disgruntled employees or hackers may not. WikiLeaks and investigative reporting can shine light in otherwise dark places.
Lawyers should be engaged for VDP assignments if there is an element of privilege that is relevant or if there is a crime related to the disclosure.
In most cases, your professional advisor can handle the complexities of this procedure.
Check it out on CRA's website - here.
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SMALL BUSINESS DEDUCTION
CRA sweep in progress...
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The accounting community across Canada has recently noted a series of correspondence from CRA requesting details of corporate businesses operations in connection with a review of the small business deduction claim for some clients.
If a business is determined to be a Personal Services Business (PSB) or a Specified Investment Business (SIB), the small business deduction is denied, and additional taxes are applied. A PSB is often referred to as an "incorporated employee". Basically, it exists where an individual provides employee-like services through a closely held corporation,
rather than providing them directly as an employee.
Generally, a corporation earning investment income (interest, real estate rental, royalties, capital gains and dividends) is generating SIB income.
Many of these letters appear directed to corporations in the real estate sector like real estate agents and those earning rental income. It has also been noted that letters have begun to be issued in respect of other sectors as well.
Action Item: In many situations, an appropriate explanation will conclude CRA's interest in the corporation. If such a CRA inquiry is received, contact us as soon as possible.
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CRA FAUX
Another CRA look alike email...
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Good Day
Attached, is a copy of your 2015 Tax Return Report which was recently filed and approved. Our system has generated an error after processing it, which require your immediate attention.
Kindly download the attached document to view full report and reason for this error. You need to respond to this within the next 24-72 working hours
Canada Revenue Agency
875 Heron Road
Ottawa ON K1A 1B1
www.cra-arc.gc.ca
This is a fraud and although the link is genuine, CRA will never communicate by a direct email to any taxpayer and NEVER open any attachment from a dubious source!
Top of Page
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HOME ACCESSIBILITY TAX CREDIT
Seniors only...
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This new non-refundable credit will provide federal tax relief of
15% on up to $10,000
of eligible expenditures per calendar year, per qualifying individual (a person 65 years of age or older at the end of the particular taxation year or a person eligible for the Disability Tax Credit). If there is more than one eligible individual in a residence, the maximum eligible expenditure for that property will be $10,000.
A qualifying renovation
is a renovation or alteration that is of an enduring nature and is integral to the eligible dwelling. The renovation must:
- allow the qualifying individual to gain access to, or to be mobile or functional within, the eligible dwelling; or
- reduce the risk of harm to the qualifying individual within the eligible dwelling or in gaining access to the dwelling.
The credit is eligible for expenditures after 2015.This credit may be compounded with the similar provincial credits offered in BC, Ontario, and New Brunswick.
Action Item: As the $10,000 limit is annual, consider improving the house in stages over a number of years.
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Recent CRA Decisions
There is no escape from tax...
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NOEP=NOPE!
No expectation of Profit (NOEP) means No deducting losses (NOPE!)
Minister disallowed taxpayer's business loss deduction claims and ITC claims on ground that taxpayer not carrying on a business or a commercial activity - Whether Minister's position justified - The Minister: (a) disallowed the taxpayer's business loss deduction claims for 2006, 2007, and 2008; and (b) disallowed the taxpayer's corresponding ITC deduction claims on the ground that he was not engaged in a commercial activity during the same period.
In dismissing the taxpayer's appeal, the TCC concluded, in essence, that the taxpayer was not engaged in the current pursuit of profit during the relevant period, but was merely pursuing the "inherently personal activity" associated with getting an education for subsequent use in pursuing a profit.
In dismissing the taxpayer's further appeal, the FCA concluded that; (a) the TCC Judge applied the test for carrying on business laid down in Stewart v. The Queen 2002 SCC 47, and committed no palpable and overriding error in reaching his conclusions which were amply supported by the evidence; and (b) the taxpayer was simply asking the FCA to reweigh the evidence which had been before the TCC Judge, and to reach a different conclusion from the one reached by the TCC Judge, which the FCA could not do.
DE FACTO CONTROL!
Small business deduction - Whether taxpayer was associated with other corporations - Proper test for determining "de facto" control - Whether trial Judge applied proper test - Whether palpable and overriding error in trial Judge's findings - The taxpayer was appealing a Tax Court decision (2014 TCC 357) that
denied the taxpayer a small business deduction ("SBD") on the basis that it
was associated with one or more corporations. The trial Judge held that Gordon Howard ("GH") who had
de jure and de facto control over GRR Holdings and MorCourt Holdings ("MC") also had
de facto control over the taxpayer, thereby making the taxpayer associated with GRR and MC. In determining that GH had de facto control the trial Judge
applied a broad test, finding that GH had control over the daily operations and as such had de facto control.
The trial Judge applied the wrong test by looking at the daily operations.
De facto control will be found where a person has the right to effect a significant change in the board of directors or has influence over a shareholder who has the right to elect the board of directors.
In applying the right test to the facts of the case, the standard of review is that of a palpable or overriding error. GH was the sole director and officer of the taxpayer and there was no written shareholder agreement. The trial Judge found that there was an unwritten agreement between GH (who owned 24% of the shareholdings) and his wife, Ruth Howard (who had de jure control of the taxpayer, owning 76% of the shareholdings) that GH retained the right to determine the board of directors.
As GH had the ability to influence the composition of the board of directors, he met the legislative test for having "de facto" control.
One must give deference to the factual findings of the trial Judge. It was open on the evidence for the trial Judge to find that there was an unwritten agreement and that the conditions for the taxpayer being associated with GRR and MC were met. The appeal was dismissed
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| Disclaimer |
 The preceding information is for educational purposes only. As it is impossible to include all situations, circumstances and exceptions in a commentary such as this, a further review should be done. Every effort has been made to ensure the accuracy of the information contained in this commentary. However, because of the nature of the subject, no person or firm involved in the distribution or preparation of this commentary accepts any liability for its contents or use.
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NEW NEWS
All you need to know...
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Watch this 10-minute rapid-fire discussion of select recent developments in the wonderful world of Canadian tax by the
Video Tax News Team.
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| LIFE IN THE TAX LANE- April 2016 |
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Sincerely,
Howard Render, CPA*CA
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