Facts: The taxpayer was appealing reassessments
that denied its claim for a small business deduction and limited
expenses claimed on the basis that it was providing services as a
"personal services business"
("PSB"). The taxpayer was incorporated
by Ivan Cassell ("Cassell") in 1983 to
operate a home comfort centre for Imperial Oil. After several
years, the taxpayer began working for Ultramar for about six years
as a supervisor, looking after all the independent retail agents of
Ultramar located on the west coast of Newfoundland and southern
In 1990, Cassell left Ultramar and bought an area of retail
business from them outside the major urban centres of Newfoundland.
Cassell began growing Cassell Limited's
("ICL") retail oil and gas business by
acquiring several gas stations in areas that the major oil
companies were leaving. The retail oil and gas business of ICL was
carried on under the business name Western Petroleum
In 2005, Western Petroleum Newfoundland Limited
("WPNL") was incorporated and ICL
transferred its WP business to WPNL and the business expanded
throughout Newfoundland. Over the years, the Cassell provided
services to WPNL in his capacity as president of ICL and was, at
the same time, the president and director of WPNL.
At issue were the services provided by Cassell to WPNL in his
capacity as president of ICL. The services were provided under an
oral agreement and included banking, negotiating contracts, and
dealing with suppliers.
Held: The appeal was dismissed.
Should Cassell be reasonably regarded as an employee but for the
existence of ICL, the small business deduction is not available to
ICL and the PSB provisions would apply. The PSB provisions are
designed to deny tax advantages that may be obtained by providing
services through a corporation rather than personally.
There is no one conclusive test or determinative factor but
issues of control, risk of loss and opportunity for profit are to
The stated objective of Cassell providing services to WPNL was
to grow its business with no mention of ICL's business. There
was no written agreement between ICL and WPNL, no HST was charged
on fees paid by WPNL and ICL did not advertise its services. ICL
leased gas stations to third parties, distinct from their providing
management services, which generated income for WPNL. When the
tenants were delinquent in paying rent, they were not pursued for
the rent so that WPNL would continue to gain revenue. The
profitability of WPNL took precedence over the earning of rent by
ICL, confirming that Cassell's focus was solely on the
profitability of WPNL's business. The court reasoned that
someone in business on his own account would not have such a
Furthermore, the functions performed by Cassell after the
transfer to WPNL were the same as those performed by him as a
senior employee of ICL. Any opportunity for profit was tied to the
success of WPNL and there was limited exposure to risk of loss. In
fact, the expenses incurred by ICL were miniscule in comparison to
the monthly fees it received from WPNL and should the existence of
ICL be ignored, then Cassell would not bear any real risk of loss
under the compensation arrangements with WPNL. In other words, the
only substantive economic risk faced by ICL was the risk inherent
in WPNL's business, which governed WPNL's ability to pay
the monthly fees.
Moreover, Cassell had the use of a company car and had a
makeshift desk to work at when he went into the office. Although
there was no direct control of Cassell's activities he had
weekly meetings at WPNL which is consistent with the degree of
control that might be exerted over a senior employee of WPNL.
All factors considered, if the existence of ICL were ignored,
there is no evidence of business-like activity to support the
conclusion that Cassell would reasonably be regarded as providing
the services as a person in business on his own account.
For those reasons, the Court affirmed that the small business
deduction was properly denied.
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