Business and Personal Tax Updates

Issue 26 – June 2013
When it comes to income, taxation and the CRA, there are rules governing almost every type of transaction, deduction and credit. Should you run afoul of the rules, even if by accident or circumstance you risk closer scrutiny and possible legal action.

This month’s newsletter covers a wide variety of topics – from tax court rulings on Director liability to GST/HST travel allowances,employment income and tax planning

If you own a business, you’re likely looking for answers to any number of questions on managing cash-flow, business management,tax,budgeting or even something simple like updating your bookkeeping system.I invite you to personally call me at 506-657-4067 or 1-800-650-4067 to see how we can help you.

I look forward to hearing from you and I hope you enjoy the following summaries.

Donna Mazerolle
www.DonnaMazerolle.com

P.S. As a favour to a friend or business colleague, feel free to forward this email to those who you think could benefit from the information below.

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OWNER-MANAGER REMUNERATION


DIRECTOR LIABILITY

In an October 16, 2012 Tax Court of Canada case,the issue was whether the Appellant, as a director of the corporation,was personally liable for the unremitted GST of $2,512.


Taxpayer wins

The Court noted that he had effectively lost control over the corporation’s affairs.

It was also noted that the individual is not necessarily personally liable if external constraints(such as psychological,economic and social control) were such that a reasonable person who was a victim of the same control would have done nothing.

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GST/HST


INPUT TAX CREDITS (ITCs) – TRAVEL ALLOWANCES

In a January 17, 2013 Tax Court of Canada case, ITCs of $126,339 were claimed with regards to travel allowances paid to employed sales representatives for the estimated number of kilometers driven.


Taxpayer loses

The Tax Court noted that:

  1. The allowances paid were based on an estimate of the kilometres to be travelled and not on the actual kilometres driven for business.
  2. The Excise Tax Act (ETA) permits ITCs related to non-taxable allowances,however,the allowance must be based on the actual number of kilometres driven
  3. The requirements were not met, and the ITCs were not allowed.

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EMPLOYMENT INCOME


TAXABLE BENEFIT – EMPLOYER PROVIDED MOTOR VEHICLES REQUIRED TO BE TAKEN HOME AT NIGHT

It was noted by the CRA in Income Tax Technical News No. 40 (June 11, 2009),that travel from home to the office for some employer provided motor vehicles may still be considered taxable benefits even if the vehicles are required to be taken home and prohibited from any other personal use.

It should be noted that when calculating the benefit,the use of these vehicles is not considered personal if the employee proceeds directly from home to a point of call or returns home from that point of call.

RENTAL OF TOOLS AND MOTOR VEHICLE
In a November 29, 2012 Technical Interpretation, CRA indicates that they may consider rental payments made to an employee for the use of his or her vehicle and tools to be income from employment, and not from property, on the basis that the payments are received by virtue of an employer/employee relationship.

DOOR PRIZES
In a February 4,2013 Technical Interpretation,CRA was asked about door prizes received by attendees at a company social event where every attendee received a door prize.

CRA indicated that their tax-free $500 gifts and awards policy would apply to gifts received by the employee, the employee’s spouse, and any other non-arm’s length person.

The questioner suggested that gift cards may be given. CRA noted these near cash gifts would not be included under their gifts policy.Therefore, the value would be taxable to the employees.CRA referred to the detailed discussion of their gifts and awards policy at www.cra.gc.ca/gifts.

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ESTATE PLANNING


DEFERRING OLD AGE SECURITY (OAS)

A person may defer receiving the OAS pension by not applying for it at age 65. The pension amount will be increased by.6% per month of deferral after your 65th birthdayor July 1, 2013, and stays in effect until your 70th birthday.

It also appears that a person that turns 65 before July 1, 2013 could consider delaying the receipt of OAS payments for up to five years beyond the 65th birthday. However, the OAS increase of .6% per month will not commence until July 1,2013.

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WEB TIPS


FINANCIAL CONSUMER AGENCY OF CANADA (FCAC)

The FCAC is an independent body working to empower Canadians to expand their consumer education in the financial sector.

FCAC operates a website, www.fcac-acfc.gc.ca/eng/index-eng.asp,with a host of information on various financial products and services available in Canada such as mortgages, credit cards, insurance products, and other banking services.

Consumer education on the site comes in the form of toolkits and calculators, written commentary, pamphlets, and questions and answers, all of which are fairly simple to use and understand.The website also provides an area devoted to education about fraud.

In addition, it provides direction for consumers on launching complaints against various federally regulated financial institutions and payment card network operators.

As the FCAC is an independent body, information bias is reduced

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Donna Mazerolle & Associates provides:


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The preceding information is for educational purposes only. As it is impossible to include all situations, circumstances and exceptions in a newsletter such as this, a further review should be done by a qualified professional.

Although every reasonable effort has been made to ensure the accuracy of the information contained in this newsletter, no individual or organization involved in either the preparation or distribution of this letter accepts any contractual, tortious, or any other form of liability for its contents.