Recently, I was contacted by a small business owner who had an
unpleasant conversation with a Canada Revenue Agency
("CRA") collections officer about an outstanding goods
and services tax/harmonized sales tax ("GST/HST")
assessment against his small company (of which he was a director).
The CRA collections officer had threatened to send the sheriff to
his house that very day to seize personal assets. When I called the
CRA collections officer, she suggested to me that she merely
discussed the director's liability process to the small
business owner. What because clear to me is that the CRA was not
clear in what was said because the lack of clarity could result in
payments against the outstanding debt. The CRA collections officer
was deliberately attempting to make the small business owner
However, what was actually happening is that the CRA collection
officer had completed a direction to the sheriff to determine the
assets of the reassessed corporation. If the sheriff prepares a
"No Assets" report, then the CRA could issue a
director's liability assessment under section 323 of the Excise
Tax Act. Only after the CRA issues a director's liability
assessment against the small business owner could the CRA ask the
sheriff to seize personal assets. The problem in this case was that
the address provided by the small business owner for the business
was his home address. It was for that reason that the sheriff would
come to the home to determine if the corporation has assets that
could be seized.
What needed to be done was satisfactorily resolve the
corporation's GST/HST reassessment issues. The following are
tips to keep the CRA collections officer happy and away from
personal assets from the small business owner.
Do not use your home address
as your business address. If you have an operating
business and a business location that is not your home, use that
address for communications with the CRA. If the CRA collections
officer issues a direction to the sheriff to prepare an assets
report, the sheriff would go to the business address.
See if you can enter into a
payment arrangement with the CRA to satisfy the corporation's
debt. The best way to avoid a director's liability
claim is to make sure there are sufficient assets in the
corporation. The payment arrangement usually will be acceptable is
it covers 6-24 months (that is you give post-dated cheques to pay
the debt over time).
If you have a payment
arrangement and have provided cheques to the CRA collections
officer, you may provide proof of such arrangement to the
sheriff. The sheriff usually takes this into consideration
when preparing an assets report. If the assets report does not
state that there are no assets, the CRA may not be able to issue a
director's liability claim (depends on the facts).
If you enter into a payment
arrangement, ensure there are sufficient funds in the account to
pay the cheques. If a cheque is returned NSF (not
sufficient funds), then the CRA collections officer will look at
other options to get the money.
During the period of the
payment arrangement, make sure you are up-to-date on all CRA
filings and payments (including GST/HST, income tax, payroll taxes,
etc). CRA collections officers are nervous fellows and
gals and they will get concerned if the debts of the corporation
start increasing. This means that the cheques they have no longer
cover the outstanding liability and that the outstanding liability
will not get paid.
While the company is paying
off the debt, apply for interest relief. If the CRA
accepts your interest relief request, your outstanding debt will
decrease. Every little bit helps.
While the company is paying
off the debt, if you are able to make a significant payment, do
so. This stops the interest clock on the amount you
If you have nothing to hide
(and even if you do have something to hide), be honest with the CRA
collections officer. Things you say may cause the CRA
collections officer to become concerned.
Along the same lines, provide
the information that is requested by the CRA collections
officer. If the CRA collections officer trusts you, he/she
will be more likely to exercise discretion.
Always remember to be
civil. The CRA collectinos officer has a job to do. It
does not become personal unless you make it personal. Know that
they have a supervisor that wants to see results. Help them to
Bonus tip: If you cannot make it work with a CRA collections
officer because of a personality conflict between you and her/him,
ask to meet with the CRA collections officer and his/her
supervisor. Do not use this opportunity to rant at the supervisor
because you will only show the supervisor that the CRA collections
officer is right about you. Take the opportunity to press the reset
button of the relationship. You need a positive resolution to your
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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