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Employment Insurance

ENTITLEMENT

Taxpayer could not change status to employee unilaterally

Appeal by taxpayer from decision by Minister denying taxpayer’s application for employment insurance benefits. Taxpayer was executive chef at resort for six months. Minister found that taxpayer was not engaged in insurable employment for purpose of Employment Insurance Act (Can.). Appeal dismissed. Taxpayer and resort shared on-going, common intention that taxpayer was independent contractor. Parties’ negotiation of contract indicating taxpayer would be independent contractor at initial meeting was evidence both intended taxpayer to be independent contractor. Taxpayer could not change status to employee unilaterally after resort failed to reduce contract to writing. Given taxpayer’s training and experience as executive chef and owner’s inexperience, lack of supervision, control and training were not useful factors in determining taxpayer’s status. Failure to hire assistants for costs reasons suggested ability to do so and was consistent with independent contractor relationship. Taxpayer’s failure to work for others and freedom to come and go while at resort were consistent with independent contractor relationship. Taxpayer’s declaration of ownership of, and claim for compensation in respect to, “signature dishes” strongly supported independent contractor relationship. Level of control was objectively consistent with parties’ intention that taxpayer be independent contractor. Chance of profit was objectively consistent with status as independent contractor but risk of loss was not.
Therrien v. Minister of National Revenue (Apr. 22, 2013, T.C.C. [Employment Insurance], David E. Graham J., File No. 2012-4957(EI)) 227 A.C.W.S. (3d) 1037.

Taxation

GOODS AND SERVICES TAX

University not liable to collect and remit GST on parking fines

Appeal by university from reassessment by Minister under Excise Tax Act (Can.), for period from April 1, 2003 to May 31, 2005. University had four types of parking spaces. Permit lots and visitor lots were identified with signs and visitor lots had more information indicating that vehicles not displaying valid receipts were subject to ticketing and impoundment. University hired people to patrol and enforce parking regulations and issue ticket to be left on car for infractions. On reverse of ticket it was written that traffic offence notice (TON) was issued under authority of s. 27 of University Act (B.C.). Appeal allowed. Reassessment was referred back to Minister for reconsideration and reassessment on basis that university was not liable to collect and remit GST on parking fines. By driver’s conduct in taking parking space, knowing that there was requirement of permit of TVM ticket to prove payment and leaving without having complied, now with TON indicating that driver owed university $30, non-paying driver had, in accordance with reasoning of Federal Court of Appeal in 2000 judgment, struck deal with university. Contractual terms of contract between non-paying driver and university did not provide for consideration for parking spot but agreement by non-paying driver to run risk of having to pay fine. There was no intention to breach agreement to pay for taxable supply of parking. University had statutory authority to invoke fine for traffic offence and this is what it did. Fines were imposed because non-paying drivers were effectively stealing. Notwithstanding there may have been contract, in these circumstances GST was not exigible on fine.
Simon Fraser University v. R. (Apr. 22, 2013, T.C.C. [Informal Procedure], Campbell J. Miller J., File No. 2012-1698(GST)I) 227 A.C.W.S. (3d) 1201.

Taxation

Worker was double-dipping with employer’s consent

Appeal by worker from determination by Minister that worker was not engaged in insurable employment. Worker was employed by corporation wholly owned by his brother. Minister determined that worker was not engaged in insurable employment on basis that he was related to his employer and terms and conditions of his employment were not substantially similar to arm’s length terms. Appeal dismissed. In essence, worker was double-dipping with employer’s consent, which was not indicative of arm’s length dealing. Evidence was lacking in detail regarding amount of time worker spent on various duties, which was crucial here as some duties, such as deliveries, were typically lower-paying than sales representative’s job. Minister also raised various other facts that supported determination, including that large pay raise and large salary advance would not be given at beginning of employment in arm’s length relationship.
Zhang v. Minister of National Revenue (Feb. 20, 2013, T.C.C. [Employment Insurance], J.M. Woods J., File No. 2012-2508(EI)) 225 A.C.W.S. (3d) 865.

Taxation

INCOME TAX

Expenses incurred to perform pro bono services not deductible

Appeal by taxpayer from reassessment by Minister. Taxpayer was lawyer who was member of bar in Ohio, New York, and Massachusetts. In 2009, taxpayer was employed by corporation. Taxpayer filed income tax return under Income Tax Act (Can.), for 2009 taxation year. Taxpayer reported that he earned no business income and he incurred business expenses of $10,520. Minister disallowed expenses in total amount of $8,242 for continuing legal education courses, travel, meals, office, supplies, and telephone. Appeal dismissed. There was no evidence on which it could be concluded that taxpayer had law practice. Positions which taxpayer held as director of corporation were offices. Taxpayer was limited to deductions permitted by s. 8 of Act. There was no provision in s. 8 that would allow taxpayer to deduct costs of his continuing education courses and related travel and meal expenses from his office and employment income. Expenses taxpayer incurred to perform pro bono services were not deductible.
Jamieson v. R. (Feb. 18, 2013, T.C.C. [Informal Procedure], Valerie A. Miller J., File No. 2011-3994(IT)I) 225 A.C.W.S. (3d) 860.

Taxation

SERVICES TAX

Imposition of GST on lawyers’ fees did not infringe Charter rights

Determination of question of whether or not imposition of GST on lawyers’ fees for criminal defence services infringed rights of registrants’ clients under s. 10(b) of Canadian Charter of Rights and Freedoms on appeal by registrant from assessment and imposition of interest and penalty under Excise Tax Act (Can.). Registrant law corporation failed to collect and remit GST on legal services it provided. It was determined that imposition of GST on lawyers’ fees did not infringe client’s Charter rights. It could not be said that s. 165(1) of Act had specific purpose of taxing legal services in defence of state-sponsored prosecution. Parliament did not single out those particular services for different treatment under provision and registrant failed to show that s. 165(1) of Act had invalid purpose. Registrant did not provide any reasonably imaginable circumstances or hypotheticals that would demonstrate breach of s. 10 (b) rights. Right to counsel under s. 10(b) of Charter was not ongoing right throughout preparation and hearing stages, but was limited to time surrounding arrest or detention. Constitutionality of GST on criminal defence services was not question of law alone, and it was not apparent on its face that tax would impede access to counsel.
Stanley J. Tessmer Law Corp. v. R. (Jan. 28, 2013, T.C.C. [General Procedure], B. Paris J., File No. 2007-3627(GST)G, 2007-3628(GST)G, 2007-3629(GST)G, 2007-3630(GST)G, 2007-3631(GST)G) 224 A.C.W.S. (3d) 508.

GOODS AND SERVICES TAX

Appellant did not have reasonable expectation of profit from commercial rental

Appellant wrote for local newspaper. Respondent denied appellant’s writing column was business. Appellant claimed losses of $33,165 in 2006 and $3,708 in 2007. Appellant rented tools and equipment. Appellant was disallowed maintenance and repair expenses with respect to rental property. Appellant appealed reassessment of goods and services tax (“GST”) by which Minister determined commercial portion of appellant’s property rental activity and tool rental activity were not commercial activities within meaning of s. 123(1) of Excise Tax Act (Can.). Appellant consolidated income and expenses from all appellant’s activities. Appeal was allowed in part. Appellant wrote for local newspaper as part of appellant’s political activities. Appellant did not make profit from columns appellant wrote for local newspaper. Appellant did not prove connection between legal fees claimed by appellant for lawsuit and columns written by appellant from specified date on. Appellant did not intend tool rental to be stand-alone business. Tool rental was incidental to operation of rental property. Incidental tool rental revenues should have been included in rental property revenues as part of rental property operation. No adjustment was made because it was not shown with certainty how much revenue was actually earned. Appellant’s commercial rental did not constitute commercial activity as defined under s. 123(1) of Act. Appellant did not have reasonable expectation of profit from commercial rental. Roof repair was to be allowed as current expense rather than on made on capital account.
Palangio v. Canada (Oct. 24, 2012, T.C.C., Paris J., File No. 2011-2064(IT)I; 2011-2065(GST)I) 223 A.C.W.S. (3d) 262.

Taxation

INCOME TAX

Appellant failed to treat tax compliance obligations as priority

Appeal by taxpayer from late filing penalties. Appellant land development company filed 2003 tax return, due April 30, 2004, in November 2004 declaring no net income and no tax payable. Appellant filed amended return for 2003 in November 2008 declaring income of $292,232 and tax payable of $28,659. Appellant filed 2006 tax return, due April 30, 2007, in August 2009. Appellant assessed late filing penalties of $3,152 for 2003 and $216,479 for 2006. Appellant also assessed late GST filing penalties for various periods. Appellant’s sole shareholder testified 2003 return not filed in timely manner because loss anticipated and appellant had unused non-capital losses from previous years to offset any income. Witness erred in anticipating loss as result of failure to consider “soft expenses” not deductible from income. Witness testified 2006 return also not filed in timely manner because of anticipated loss, but could not explain how income underestimated by $5.8 million. Witness provided similar explanation for failure to file returns and remit GST in timely manner. Appeal dismissed. Issue whether appellant exercised requisite level of due diligence in relation to filing various returns within time required. In circumstances, proof of due diligence required proof of reasonable mistake of fact. Taxpayer could avoid late filing penalties if able to establish, on balance of probabilities, reasonable grounds to believe no tax owing. Witness’s evidence fell short of establishing reasonable grounds on both subjective and objective tests. Court satisfied appellant had simply failed to treat tax compliance obligations as priority.
830480 Alberta Inc. v. Canada (Dec. 3, 2012, T.C.C., Hogan J., File No. 2010-3252(IT)G; 2012-115(GST)I) 221 A.C.W.S. (3d) 757.
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